This article explains how to incorporate.
First, and foremost, please consider hiring a lawyer to help you. It could save you a lot of money in the long run.
Even an online lawyer like LegalZoom and RocketLawyer are much safer options than doing it yourself.
The information below is provided to help you do it yourself (if you really want to, but not recommended) and at least to understand the process.
So, first, why incorporate?
The short answer is to provide you with some legal protection in the event of bankruptcy or lawsuit. Incorporating can help protect your personal assets, if you do it right!
So, what is the right way?
To keep it simple, let’s assume you are a startup that will eventually want to raise funds.
In this case, you should choose a C-Corp or S-Corp. Professional investors prefer to invest in corporations that are C-Corp because the laws and paperwork are standardized, and future acquisition and IPO are possible with this entity type.
Here is the difference between a C-Corp and an S-Corp:
C-Corporation – a normal common company, like you already know of.
* Has stock.
* Has Articles of Incorporation ~ filed in a State where the company is “born”
* Has a corporate shield for liability.
* Must file and pay corporate taxes
S-Corporation
* Does not pay corporate tax. (but still files forms)
* All profits flow to shareholders and gets taxed on owner’s individual income statement
* Requires less than 100 shareholders and 1 type of stock.
* Has a corporate shield for liability.
How do you incorporate then? Simple! Get a lawyer, or….
Fill out your own “Articles of Incorporation” in your state or perhaps Delaware.
Can file in any state, most common = Delaware
http://corp.delaware.gov/howtoform.shtml
Costs $89 (must fax) + Annual Registered Agent Fees
Why Delaware?
Because they built a reputation to make it easy & have a history of it.
Their laws are also quite common and accepted in all states. “Delaware Law”.
The downside, you will need to pay a “registered agent” in Delaware to forward your mail.
Your home state is also a good choice, you can be the registered agent.
In my case, Texas:
https://direct.sos.state.tx.us/acct/acct-login.asp Costs $300 (no annual fee)
An S-Corporation is simply an extra form of C-Corporation. To elect as an S-Corporation, you send an extra form to the IRS:
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/S-Corporations
