According to the Census Bureau’s Survey of Entrepreneurs, there are more than 5.6 million employer firms across the United States. That means a little more than half a million people are incorporating a business and starting their entrepreneurship journey. But the road to becoming a business owner can often feel isolating, confusing, and overwhelming.
You may have a brilliant business concept or feel passionate about your industry. But, incorporating a small business involves legal understanding, follow-up, and attention to detail. In fact, this is the first and most important step to legally and properly organize your company.
So, what do you need to know about incorporating a business in the United States? Read on to better understand the process and learn these key steps.
What It Means to Incorporate a Business
Before learning how to incorporate a business, you may be unclear on what incorporation actually means and entails. Incorporating a business is the legal process of creating a separate business entity that is recognized by state jurisdiction. When you incorporate a business, your company will have options of formation.
For example, many business owners prefer to create Limited Liability Companies (LLC). This protects their individual assets apart from the company. But, there are many types of businesses you can incorporate.
Incorporating your business is an important step to legitimizing your enterprise. Let’s explore the process of incorporating.
Where you choose to incorporate your business matters. In the United States, each state has its own legislation and rules around incorporation. Some states may require you to incorporate and conduct all business activities in the state.
Research each state’s corporate and business statutes to decide where the best opportunities are. You may find particular states offer attractive tax benefits.
And if you are a foreign business owner, some states may be more welcoming than others. Check out this homepage to learn more about legislation and incorporate your business the right way.
Choosing a Business Name and Address
Next, you’ll need to decide on your business name and address. This information will appear on your incorporation documents and can be difficult to change. It is important to do due diligence and choose a business name that won’t cause legal trouble down the line. If you plan on incorporating your business as one name but using another name on your storefront or marketing collateral, you may need to file a Doing Business As (DBA) document.
Identifying Business Ownership and Responsibility
Your incorporation documents identify who owns the business. Will there be other partners involved?
Note all names and contact information in these documents. This is especially important if you are starting your business as a partnership or corporation.
Payments and Renewals
Each incorporation may have different fees and renewal cycles depending on the state legislature. Budget these incorporation fees into your business plan and don’t forget to stay on top of renewal fees year after year. Missing a renewal could cost your business legal fees and late penalties.
Incorporating a Business Is an Important First Step
Incorporating a business is a crucial part of getting your company off the ground. It is extremely important to do your research according to jurisdiction and follow these steps to ensure your business incorporation was completed thoroughly and correctly. Remember that U.S. law and even some clients will ask if a business is incorporated.
It is your duty to manage this documentation and apply for renewals. Did you find this information helpful? Then, check out our other business stories.