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How to Form Your Own Corporation – Tips to Starting Your Own Business

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How to Form Your Own Corporation – Tips to Starting Your Own Business: If you are a small business owner, forming your own corporation has many benefits. From protecting your personal assets in the event of a lawsuit against your company to creating more revenue opportunities, a corporation has many advantages to a sole-proprietorship or partnership in the business world. That being said, the process to incorporate your business is very detailed, and it will require time and money to accomplish. However, if you determine that the benefits of incorporating outweigh the negatives, forming your own corporation can be done.

The first step in the process is to come up with a name that your business will be incorporated as. The name should tell customers what you provide, but it should also be catchy and easy to remember. The critical component with this step is to check with the trademark registrars in both your state and nationally to ensure that your corporation’s name is unique and won’t result in any trademark infringement lawsuits.

Next, you have to determine the type of corporation that you want to form as well as its location. The location doesn’t necessarily have to be the state where you live, but this option generally is the cheapest. However, it is worth looking into tax laws and other fees to determine if incorporating your business in a different state would be more beneficial. As for the type of corporation you choose, you have three main options – an LLC, S corporation and C corporation. While all three types offer advantages and disadvantages, the most practical option for most small business owners is an LLC.

Known as a limited liability company, an LLC provides limited liability and flexibility with profit distribution. The main step in forming an LLC is to file articles of organization with your Secretary of State. There is a fee attached with this step, but it is literally the only legal step involved in the process. However, it is recommended that you have an operating agreement in place between yourself and other people involved in the LLC. This agreement will handle how profits will be distributed and other business aspects. The biggest downfall of the LLC is that it dissolves when a member of the business leaves the LLC, giving a limited life.

Unlike the LLC which is relatively easy to form, S corporations and C corporations have additional steps in the formation process. You must still go through the Secretary of State in order to register your business’ name and articles of organizations. However, you are also subject to corporate legislation in your particular state, which could require additional paperwork and fees. In addition, you will need to form a board of directors, and the board must hold meetings that are documented and on file.

Regardless of the type of corporation you choose to form, there are two parts of the process. You have the organizational side of things where you gather the information you need to decide which type works best for your business and your situation. The next part is to file the appropriate paperwork with your Secretary of State as well as any other documents that need to be completed depending on the type of corporation you chose to form.

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