Why You Should Incorporate (and How to Make it Happen)

If you’re like most entrepreneurs, you see a lot of parallels between your business and your children. You love them and nurture them while they grow. You sometimes get frustrated at them. And above all, you want to protect them and keep them safe.
 
That’s why this year, I want to encourage you to incorporate your small business. Now, you might think your business is too small to need incorporating, but businesses of every size can benefit from forming a corporation — including home-based businesses. In fact, there is no business too small to be a corporation!
 
 

Why It’s Essential

There are so many perks to becoming a corporation. Where do I begin? Let’s start with the tax benefits: because corporations are taxed at a lower rate than individuals, you can collect some substantial tax savings once you change your business formation status. But don’t worry: you don’t have to do anything different on your taxes. Just file your personal taxes as usual, including the financial details from your corporation.
 
And going back to that protection reference: as a sole proprietor (which you are by default if you haven’t elected a different business status formally), your personal assets are hanging out in the air, vulnerable to lawsuits and bankruptcy. Should someone sue your business, they’re essentially suing you, and your assets could be seized to cover bank and legal fees. You don’t want that, so take the steps to protect what you’ve got.
 
And finally, incorporating can lend more credibility to what you do. Having that “Inc.” at the end of your business name tells potential clients that you’re not going anywhere, and that they can trust your brand.
 
 

Great. How Do I Get Started?

If you’re envisioning this complex process to incorporate (maybe that’s why you’ve been avoiding doing it), I’m going to have to disappoint you. You have several options for getting incorporated, but they’re all easy enough to do.
 
First, you can go the DIY route. You can visit your state’s Secretary of State website to download the forms (for example, if you wanted to incorporate in California, you’d go here), read the directions, and fill them out. Once you submit them, be aware it can take several weeks or even months before they’re approved, so you can’t start officially operating as a corporation until you get word back. It will take a bit of your time and brain energy with this option, but the only cost is your state’s filing fee.
 

Another option is hiring a lawyer. Now, for many businesses, this is overkill. You don’t need to pay an expensive lawyer to incorporate for you, but if you already have legal representation or have a complex business structure, you may consider it.
 
A third option is to work with a legal document filing service. They exist solely to help businesses like yours incorporate or handle other business filing needs. You’ll pay far less than you would with a lawyer, and you just have to answer a few questions about your company, then they’ll take care of the rest. The perk of this option is that if you are in a hurry to become a corporation, they can expedite the process for a modest fee.
 
Whether you’re just now starting a business or have been operating for years, it’s time to take the appropriate measures to protect that (business) baby.
 

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Nellie Akalp

CEO of Corpnet.com at Corpnet
Nellie Akalp is a serial entrepreneur and small business expert. She currently serves as the CEO ofCORPNET.COM, an online legal document filing service, where she helps entrepreneurs START A BUSINESS, INCORPORATE, FORM AN LLC, and offers free BUSINESS COMPLIANCE TOOLS.
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9 Comments

  1. Chrystal

    Sorry, I don’t see where I register for the webinar. Did I miss the link?

    Reply
  2. Megan Barnes

    Hi Chrystal!

    Thanks for asking! I hadn’t posted the webinar link yet, but here it is:

    See you there! 🙂

    Reply
  3. Megan Barnes

    Tremaya, Shelley & Kelly,

    Thank you for commenting!

    We encourage and support an open dialogue here, where our moms can explore many sides of an issue. Honest feedback and diverse perspectives are more than welcomed, as they help us to better meet the needs of our readers and members.

    Personally, I’d like to understand more about the tax implications of the various business structures (i.e. when incorporating would be beneficial vs. detrimental from a financial POV).

    Hopefully this is something that Nellie can explore in further detail in the webinar on Feb 24. Hope to see you there! 🙂

    Reply
  4. Kelly (a CPA)

    Warning to readers – do NOT go to your Sec of State website and form a corporation before you are informed of the tax and filing impacts this will have on you.
    I’m surprised that this does not once mention contacting a CPA before making such a decision.
    Luckily, after reading this, my client had the good sense to contact me first.

    Reply
    • Nellie Akalp

      Hi Kelly –

      Thanks for reading and commenting. Yes, I always recommend touching base with a CPA or accountant to talk about the tax implications in full if anyone has specific tax questions.

      -Nellie

      Reply
  5. Shelley

    Wait! As a mom entrepreneur who HAS incorporated a business, I strongly suggest that mom business owners NOT do this until they really need to do it. There are tax benefits to incorporating – but only if you are highly profitable. On the other hand, there are initial costs, extra fees, and annual filings required to maintain a corporation. Research carefully, then make the decision that is right for you. You can always “upgrade” to a C Corp if you get big or want to work with institutional investors. For most business owners I have worked with, it isn’t worth the hassle just to add “Inc” after your name.

    Reply
    • Nellie Akalp

      Hi Shelly –

      Thanks for reading & commenting. Definitely every business owner incorporates at different times when she/he feels ready to do so. Incorporating or forming an LLC does protect personal liability, so even if $1 is made at a business, it can be a good idea to start building the corporate shield.

      -Nellie

      Reply
  6. Tremaya Reynolds

    Thanks for this article Nellie. I’ve had incorporation of my parent company on the backburner for a while, but I’ll definitely move forward this year in doing so- especially learning more about the protection it affords and the reasonable cost if I “DIY.”

    Reply
    • Nellie Akalp

      Hi Tremaya –

      Thanks for reading & Commenting! Anytime you’re ready to start, we are happy to help. Tune into the webinar on the 24th to get some more info and find out if you’re ready. 🙂

      -Nellie

      Reply

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