Why Should I Incorporate?

When you form a corporation, you are creating an entirely new legal entity. It's like creating a new person that has its own rights and is responsible for its own debts! All it takes is 1 person to form a corporation in most States!
The greatest benefit of forming a corporation is that it protects your personal assets. Any creditors of a corporation would have a claim against the assets of the corporation, not against the personal property of its stockholders, officers or directors. The amount of money you would risk would be limited to the amount of money invested in the corporation.

Frequently Asked Questions

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What type of corporation should I form?

General vs. Close Corporation;

A Close Corporation can have no more than 30 stockholders. Any stockholder who wants to sell their stock must first offer the stock to the all other stockholders before selling to anyone outside the corporation. A General Corporation has no restrictions on the number of stockholders it may have and the stockholders have no restriction on selling their stock. They can sell their stock to anyone, whether or not they are a current stockholder. "S" Corporation An "S" Corporation allows you to avoid double taxation by passing any profits or losses through your personal income tax. It allows you to have the protection of a corporation, while allowing you the tax benefits of a sole proprietorship or partnership. The following restrictions apply:

  • There can be no more than 75 shareholders.
  • It must be a domestic corporation.
  • Shareholders must be individuals, estates or certain trusts.
  • Only 1 class of stock is allowed.
  • It can have no nonresident alien shareholders.

Limited Liability Company (LLC)

A Limited Liability Company is an unincorporated association that combines the tax advantages of a limited partnership with the "limited liability" protection of a corporation. It is run by Members and Managers instead of Officers and Directors. It has no stockholders. Members of a LLC can be other entities including other corporations or Limited Liability Companies. A non resident alien can be a member or manager of a LLC. Instead,ownership is shown by percent of capital contributions. Please consult with your attorney, accountant or tax advisor to see which type of corporation or Limited Liability Company would best benefit you!

Where should I incorporate?

Don't be fooled by companies that say you can save money by incorporating in Delaware, Nevada or Wyoming! The best place for you to form a corporation is in the State where the business will be operating. If you incorporate in any other State, you will need to register your corporation in the state in which you are doing business as a "foreign" corporation. This means you will be spending money in two states instead of one. If you hold intellectual property and do no business in Delaware, you may be able to save more on taxes than you will spend on the extra state filings. If you need to separate operational liability from general corporate liability, or property liability, you may be able to use a second state entity as insurance and insulation. Consult your attorney or tax advisor to determine the suitability of any tax saving or liability protection strategy.

Can I incorporate federally (nationally)?

No, you cannot incorporate at the Federal level; you need to pick a state to incorporate, usually where you "do business", and if you plan to "do business" in other states, you must register as a foreign organization in them. Doing business is defined differently in each state. Generally, if you maintain an office, hire an employee, or have another nexus in a state, you must register as a foreign organization in that state.

What is Foreign Qualification?

If you incorporate or form a LLC in one State and are conducting business, or maintaining what the attorneys call "nexus" in another State you would normally be required to register you corporation or LLC in the other state as a foreign corporation or LLC. The general rule for "nexus" is if you have an office, an employee or property in a state, you have nexus and are "doing business" in that state. You should contact an attorney or accountant or check with the State where you will operate to see if you would be required to qualify to do business in that State. However, generally the following activities do not normally constitute transacting business:

  • Maintaining or defending a law suit
  • Having LLC or Corporate meetings
  • Maintaining bank accounts
  • Conducting isolated transactions that will be completed within 30 days

How do I determine if the name I want to use is available?

We will check the availability of the name before we proceed with filing the corporation. If the name is unavailable and you have provided a second choice we will use that name if it is available. If you have not provided a second choice or if that name is not available we will contact you before proceeding. Our name checks with the State DO NOT mean the name is available in regards to trademark, copyright or common law.

 

How do I chose a name anyway?

You know your business and market best, so it should come as no surprise that you are the best person to come up with the name. Once you have decided on a name or two there are some things you should do to make sure you will be able to use them.

  • If the name of your corporation will impact your choice of domain names (Web address), you should perform an internet search so see if the web URL is available. It's easy, simply type your desired domain name into your browser (like www.ready2inc.com) and see if a page shows up. If not, most modern browsers will bring up a search for similar names. If you find the domain is already used, you may be able to purchase it. Check with Internic to see who owns the domain so you can inquire about purchase.
  • Check your name choices yourself if you can - Many states make search facilities available online and you can find links to these at our state pages.
  • Check your name choices at the United States Patent and Trademark Office for Trademarks. You can learn how and perform searches online.
  • Perform a google/Bing/Yahoo search on your name choices to see if anyone else is using the name in commerce.

Remember, the first person to use a name in commerce generally owns the name for trademark purposes, and the first one to register the name with the State will be accepted.

 

Most states restrict certain words in names. "Trust", "Bank", "University", and "College" are frequently restricted. And of course, each entity must have an identifier such as inc., corp, or incorporated for corporations or LLC, or L.L.C. for limited liability companies.

Can we make changes?

Sure you can. If you need to change the name of your corporation or LLC or anything on the original Certificate of incorporation or Formation we can assist you by filing an amendment with the State. We can also file amended and restated Certificate of Incorporation or Formation, which will make the necessary changes and restate the Certificate in whole including both the original and amended information so that you will have the old and new information on one filed Certificate.

What are my responsibilities after incorporation?

The existence of the corporation begins upon filing of the Certificate of Incorporation with the State. After corporate existence has begun, an organizational meeting of the incorporator or incorporators must be held for the purpose of adopting by-laws, electing directors and transacting any other business. The initial by-laws of a corporation are adopted by its incorporator or incorporators at the organization meeting. The corporation is required to keep correct and complete books and records of account and must keep minutes of the meetings of its shareholders, board of directors and executive committee, if any. The corporation must also keep a record containing the names and addresses of all shareholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof.

  • In addition, a meeting of shareholders must be held annually for the election of directors and the transaction of other business on a date fixed by or under the by-laws.
  • By-laws and corporate books and records are not filed with the Department of State or any other state agency. These are internal documents maintained by the corporation.
  • We outline some of your responsibilities here but the list is not exhaustive. We do not provide legal or tax advice. We provide this sample of your responsibility only to give you an idea of what to expect.

Once you have your corporate paperwork in order, you should work to register with the proper authorities

  • Obtain a Federal ID number (also known as Employer Identification Number or EIN). You can apply for your EIN online at http://www.irs.gov. If you need assistance we can obtain your EIN for you for $95, you can select this option when you form your corporation or LLC with us online.
  • Register with your State's Revenue Office. More information and links available on our State Pages
  • If your State collects sales tax you will probably need a Sales Tax Permit or Vendor's License.
  • Obtain a Business license of Permit

Once again, please check for useful links and information on our State Pages

Corporate Consulting Ltd. is an incorporating service company and does not provide any legal or tax advice.

The information on this website is not to be used in place of advice from an attorney or tax consultant. Please consult with an attorney or accountant for any legal or tax advice.