Business incorporation basically allows people other than the owner to invest money into a business in exchange for having a stake in how the business operates. If a business if fully incorporated, it would be able to operate without the input of its owner. Unless the individual owner of a business has virtually unlimited funds or the business is wildly successful, business incorporation is virtually the only way for a business to grow and expand.
Business incorporations are under the control of state law and are handled differently in different states. In order to incorporate a business, you must file an incorporation charter or a certificate of incorporation, as it is called in some states, with the proper authorities. As the rules of business incorporation change from state to state, it is important to do some research before you incorporate your business and figure out which state offers the most beneficent incorporation laws.
Delaware, for instance, although a small state, is where over half of the Fortune 500 corporations are incorporated. The reason for this great confluence of massive businesses in a virtually unused and unknown state is because Delaware is one of the most corporation friendly states in the U.S. The incorporating costs in Delaware are the lowest in the Nation. There is no corporate income tax for corporations that are incorporated in Delaware if they do not conduct business transactions in the state. People who are highly involved with a corporation that is incorporated in Delaware do not have to be Delaware residents. People who own stock in corporations that are incorporated in Delaware are not subject to Delaware taxes. All of these factors need to be taken into consideration when trying to decide what would be best for you and what would be best for your shareholders upon incorporation.
When incorporating your business, one of the most important factors to pay attention to is the different franchise taxes and other incorporating taxes that apply to a corporation as soon as the paperwork is filed with the proper state authorities. Filing for incorporation in a state can be a somewhat tedious process. There are several companies that specialize in helping companies incorporate. Business Filings Incorporated is a company that provides a website for business owners interested in incorporation. Business Filings Incorporated can actually file your articles of incorporation for you. All you have to do is fill out an online form, pay a fee for the incorporation and filing, and Business Filings will submit your article of incorporation with the proper state authorities.
While an attorney is not necessary to file for incorporation, it is important that you and your potential shareholders understand what the risks and the benefits are of incorporating in a chosen state. While there are undoubtedly drawbacks to incorporating such as franchise taxes and taxes on stock, there are also benefits such as providing your business with new funding and new growth.
By Alex Turman