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Incorporating Your Business Using Three Simple Steps
By Abe Cherian
Copyright ? 2005
Incorporating your business today is much easier than it
was 10 or even 20 years ago. Here’s three steps; securing
your corporate name, filing the necessary documentation and
paying the necessary filing fees. You can complete these steps
yourself, use an incorporation service provider or have an
attorney complete them for you.
When incorporating, you must first ensure that your
corporate name is available in the state in which you want
to incorporate. Your corporate name must not be deceptively
similar to a name that is already in use in that state. A
name check must be performed in the state of incorporation.
You must also prepare and file all the necessary
documentation. the Articles of Incorporation, with the
appropriate state agency in the state of incorporation.
Additionally, you must pay all state filing fees, initial
franchise taxes and any other initial fees. Each state
charges a filing fee to form your corporation in that
state. These state filing fees vary greatly by state. They
range from under $100 to over $400.
Do It Yourself. Use An Incorporation Service Provider Or
Use An Attorney. If you decide to incorporate on your own,
you need to be well versed in the laws of the state of
incorporation. You will need to prepare and file your own
documentation and undertake all communications with the
necessary state agencies.
If you use an incorporation service company, you submit the
necessary information, and the company checks your name,
prepares and files your documents and pays the initial
state filing fees on your behalf.
Incorporation service companies charge a nominal service
fee on top of the state filing fees, and you can submit all
the necessary information to them over the Internet.
Attorneys will also undertake all of the necessary steps
for you. If you use an attorney to incorporate, you can
expect to pay their hourly fee on top of the state filing
How long this will take depends on the time the state
requires to approve and return your completed Articles of
Incorporation varies by state. On average, it takes 4-6
weeks to become incorporated.
Most states will allow you to expedite the filing process
for an additional charge. Expediting filings typically take
about 1 week. Those charges also vary by state.
After your corporation is formed, an organizational
meeting of directors must be held. At this meeting bylaws
are adopted, stock is issued and the incorporation process
is completed. Minutes of the organizational meeting should
be kept in a corporate record book.
Incorporation is an important step in the life of a
business, but unfortunately the true value of incorporating
a business is often not seen until the business faces a
negative situation such as a law suit or bankruptcy. A
primary advantage of incorporation is the limited liability
the corporate entity affords its shareholders “The Owners”.
Typically, shareholders are not liable for the debts and
obligations of the corporation. Creditors will not come
knocking at the door of a shareholder to pay debts of the
corporation. In a partnership or sole proprietorship the
owner’s personal assets may be used to pay debts of the
Other Advantages include
¡è A corporation’s life is not dependent upon its members.
A corporation possesses the feature of unlimited life. If
an owner dies or wishes to sell their interest the
corporation will continue to exist and do business.
¡è Retirement funds and qualified retirement plans “like
401k” may be set up more easily with a corporation.
¡è Ownership of a corporation is easily transferable.
¡è Capital can be raised more easily through the sale of
¡è A corporation possesses centralized management.
Corporations are not without disadvantages. The primary
disadvantage to a corporation is double taxation. Profits
of a corporation are taxed twice when the profits are
distributed to shareholders as dividends. They are taxed
first as income to the corporation, then as income to the
All reasonable business expenses such as salaries are
deductions against corporate income and can minimize the
double tax. Further, the double tax can be eliminated by
making the S corporation election with the Internal Revenue
Other Disadvantages Include
¡è There is a certain level of complexity and expense of
forming a corporation.
¡è Corporations have extensive record keeping requirements.
¡è Operating a corporation across state lines requires the
corporation to qualify to do business in the other state.
Both the Limited Liability Company “LLC” and “S”
corporation also provide the limited liability to the
owners/shareholders of the company, without the potential
disadvantage of double taxation. While like corporations
these two entities also have advantages and disadvantages,
it is a good idea to learn about all three when deciding
what form your business should take.
About the author:
Abe Cherian is the founder of Multiple Stream Media,
a company that helps online businesses find new
leads and more customers without spending a fortune.