One of the most important reasons to incorporate a business is the legal protection granted by the process. The people who work for the business would not be personally liable for problems like debts, and this would mean the company would be the one who would be sued. Additionally, the incorporated entity would be responsible for things like taxes and could even be charged with a crime, just as if it were human.
Deciding to incorporate is not a decision to be taken lightly. The legal benefits are significant; however, the tax burden for the new entity might be quite high for a new business and it’s important to speak with a tax professional about the best timing for incorporation.
Application and Basic Details
The process for incorporation first requires filling out an application with simple details required by the state in which the incorporation is to occur. Such details may include:
- Names of the owners
- Purpose of the incorporation
- Stock that may be issued after incorporation
Incorporation commonly occurs because of a business owner’s wish to create stock associated with the company. Stock holders who own a piece of the company aren’t legally bound to the company when it is incorporated.
Fees Must Be Paid
In addition to the basic information provided to the state regarding an incorporation’s primary details, there are also a variety of fees associated with the process, as well as deadlines. Additionally, there may be lawyer fees involved, and the account information on the merchant accounts, as well as the credit card processing equipment, would need to be updated.
Extensive Details for Incorporation
It is the responsibility of those at the head of the company to create a document defining the articles of incorporation. Some states offer a form for this purpose. Additionally, the company must also create bylaws that will further define the basic details of operation within the company. These documents must be created by the secretary of state after which a certificate of incorporation will be printed.
Final Details After Incorporation
After the incorporation is complete, it’s essential to assign someone to change over all the bank and merchant accounts into the name of the incorporation as well as lease new office equipment or credit card processing machines under the new entity. Legal proof that the new entity exists will be required by most companies with which a new incorporation already does business.