One of the most important first decisions you’ll make as a business owner is selecting the business structure. If you and your attorney determine that a corporation is the correct business structure, there are some procedures to follow in order to correctly file the necessary paperwork, and having a small business attorney to help can end up saving you time and money in the long run.
What is a Business Corporation?
A corporation is a legal entity independent from its owners. Depending on whether you are taxed as an s-corporation or a c-corporation, corporations may have profits and may owe taxes. Corporations taxed as s-corporations and c-corporations typically give the owners (shareholders) limited liability protection and the corporation is held legally responsible for its actions. While corporations provide protection from personal liability for their owners, corporate record-keeping, operations, and reporting must be more meticulous. Most businesses that will need to raise capital or that plan to “go public” benefit from incorporating.
Benefits of Incorporation
There are several advantages to forming your business as a corporation:
- A corporation minimizes your personal liability and may provide you with tax benefits.
- Health and life insurance premiums may be deducted from your company’s gross income on the company’s tax return.
- Incorporating also means that people will treat your firm seriously, and you’ll be able to lay the groundwork for future growth.
- You may raise cash for your company by selling shares.
- If you decide to sell your company, there may be advantages to being a corporation.
Basic Incorporation Procedures
The process of incorporating your business can vary depending on what state your business operates in, but in general, there are a handful of procedures that apply such as:
- Selecting a name for your business and researching whether or not another corporation has registered the name
- Preparing article of incorporation
- Filing articles of incorporation
- Choosing a board of directors
- Adopting bylaws
- Electing officers
- Registering an agent to accept legal documents
- Issuing stock
- Determining whether you want to be taxed as an s-corporation or c-corporation and filing the appropriate documents to be taxed as you determine
- Filing to obtain a business license
- Obtaining an EIN to tax purposes
Do I Need a Lawyer To Incorporate My Small Business?
It is possible to incorporate your small business without the assistance of a lawyer, but it may not be the best route to take. Legal fees can be an expense that many new business owners don’t want to pay. However, keep in mind that there may be a higher cost to doing it yourself: You put yourself through the tedious process and the risk of making mistakes if you don’t do very thorough research. The paper-filing process isn’t the hard part, but the do-it-yourselfer may not be aware of tax and legal liability issues. Securities regulations might be complicated if you plan to offer shares, even to those that work in the company or close friends and family.
Get Advice Before Incorporating Your Business
The structure you choose for your company has implications for ownership and how the law views your organization. The agreements you make with yourself, the business, and the other owners will have a lasting impact. Consulting with a business attorney who has expertise in creating these documents about your future plans might be the difference between a successful company and one that fails. If you’re ready to form a corporation or you’re still wondering, “do I need a lawyer to incorporate my small business”, contact the Law Offices of E.C Lewis today.