Company incorporation tips for startups

By Oscar Waterworth

Company incorporation is a major step for every startup business. It is the moment when business owner decides to make his/her startup official and, although in some countries this process can be a little bit more difficult, it sure brings a lot of benefits to the company owners and future shareholders. Some of them are:

• Incorporated company is considered to be a separate legal entity and its owners, shareholders and directors are not liable to its creditors in case of debt or a lawsuit. Unlike incorporated businesses sole proprietors and partners are legally and financially liable for their business.

• Company ownership after incorporation can be easily transferred from one owner to the other.

• It provides easier access to retirement funds and 401(k) retirement plans.

• Companies are taxed lower than individuals. Also unlike sole propriety, corporation has no limits on the amount of losses it can carry to the next tax year.

• Incorporation gives company owners a chance to sell its stocks, and that’s one of the most common ways for them to raise capital for future growth.

• Corporations can run even after their owner’s, shareholder’s or director’s demise.

• The new company has separate credit rating from its owner’s, director’s or shareholder’s one.

When it comes to doing business, the United States was ranked as the seventh best place in the world on the World Bank’s “Ease of Doing Business” list. Data that was used to determine the rankings on this list included the difficulty of the incorporation process. When it comes to this process only, the U.S. was ranked as the 46th best place, with United Kingdom (45th), Azerbaijan (12th) and Burundi (18th) being ranked higher, while Germany (114st),Switzerland (69th) and Japan (83rd) were ranked lower.

In this article we’re going to write up all the requirements needed for the company incorporation process in the United States and mention some foreign business environments that also offer incorporation benefits and a simple and transparent incorporation process.

How to incorporate a business in the United States

Incorporation process has certain requirements and it can be explained in 5 separate steps, so people understand each part of it in the best possible way. Entrepreneurs should start with these steps the moment they are sure incorporation will bring them enough benefits and profits.

Step 1: Appointing a Board of Directors

Directors should be appointed by the shareholders, and they are legally obliged to act in the best interest of the future company and its shareholders.

 Step 2: Deciding between C and S Corporation

C Corporations are suited for the bigger businesses, while the S corporations are more suitable for businesses that have less than 100 shareholders.

Step 3: Hiring a corporate lawyer 

In the United States, incorporated articles and laws are a little bit complicated so sometimes the best way to deal with these is to hire a corporate lawyer to draft the appropriate paperwork.

Step 4: Filing the forms to the Secretary of State

Company incorporation forms usually can be found on government websites or at the Secretary of State’s office. Incorporation forms are called Articles of Incorporation, and they should be filled with a lawyer’s help. Filing these forms also acquires a fee, usually from $80 to $100 for each Article. The last form that should be filed is the Statement of Information that should be filed few months after the Articles of Incorporation.

Step 5: Registering at IRS

Registering at the IRS requires filing IRS Form 1120 for C and IRS Form 1120S and 2553 for S corporations, with 2553 being the most difficult one to fill, so the corporate lawyer’s help can come very handy.

Incorporation abroad

With the complicated process of incorporation in the U.S., a lot of people decide to incorporate their businesses abroad. On the World Bank’s “Ease of Doing Business” list, five best ranked countries that have the easiest business registration processes are: New Zealand, Canada, FYR Macedonia, Armenia and Georgia. Also one of the best-ranked countries is Singapore (6th on Registration Business and 1st on Ease of Doing Business list). Singapore company incorporation is one of the easiest in the world, and in addition to this, its government offers plenty of benefits, government programs and grants for foreign entrepreneurs, which makes this country one of the most desirable places to incorporate and run business from.

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Oscar Waterworth is a writer from Sydney, Australia. A father of two and a working man, he somehow manages to find the time to write up an occasional blog post. In his free time he likes to travel, play futsal and build stuff with his kids.

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