I think it is fair to say that at some point every small business owner will question whether or not to incorporate. It is very common for a small business to start out as sole proprietorship or partnership. Down the line, when the business has grown it then makes sense to become incorporated. So how exactly do small business owners go about doing this? The quickest, easiest and least expensive way is to incorporate online.
Should you incorporate your business online? There are many reasons to consider incorporating your small business through and online incorporation service. One reason is that incorporating limits your personal liability. By incorporating your small business it will provide you with protection of personal assets such as your vehicles, home, bank and financial accounts. If your corporation gets into financial trouble and can’t repay debts, your personal assets would be protected. Generally, an individual shareholder’s liability for unpaid debts is limited to the amount that they have invested in the company. Thus, you cannot lose more than you’ve invested. Conversely, if you operate your business as a sole proprietorship, your personal assets could be seized to pay debts associated with your business. If you are a shareholder in a corporation that is operated and maintained properly you won’t be held primarily responsible for the debts of the corporation. In short, if you don’t incorporate your business and it gets into financial trouble then it could seriously damage your personal finances.
Also, by incorporating your small business it will make it more likely that you will be able obtain the financing needed for operating and growing your business. By forming a corporation you are demonstrating to a potential lender that you are committed to this venture. You are highlighting how much it means to you and how much you are willing to do in order to make it a success. These are qualities that a lender will favor, and will make them more willing to lend you money.
Another reason why incorporating your business is a good idea is that it can make it easier for you to raise capital and attract investors. The fact is corporations have more of an ability to raise money, making it a lot easier for you to grow and develop your business. Further, corporations can also raise equity capital, which is a great advantage because this type of capital doesn’t have to be repaid and does not acquire interest.
One last point to consider is that incorporating your business can help you establish credibility with customers and suppliers. The public is generally more favorable to businesses that are incorporated. People simply feel more secure dealing with a business that has an Inc or Corp placed after their name.
In my opinion the advantages of incorporating your business far outweigh any disadvantages. If you are still unsure then my suggestion is to talk it over with an accountant or lawyer and make sure that whatever you decide it is a well informed decision.
About the Author
Michael Jagoda has been an online business owner since 1996 and currently owns and operates Start Biz Here an incorporation and llc formation service. All Rights Reserved. Copyright 2010
(NOTE: blog content shown above may be linked and circulated freely on web sites, as long as ALL article content, links, author and copyright information remain UNCHANGED in any way whatsoever.)
Saturday, May 8, 2010
How to Form an LLC
LLC stands for a limited liability company. LLC’s operate much the same way as a corporation, in that it is a legal entity that can conduct business under its own name. More and more business owners’ are electing to form LLC’s every year but why exactly are so many business owners now doing this?
As the name limited liability suggests the reason why so many business owners are deciding to form an llc is to reduce their personal liability. For example if you continue to operate your business as a sole proprietor or partnership you are personally responsible for any business debts and for lawsuit settlement obligations brought against your business. Simply put nearly everything you own could potentially be at risk and be used to settle business debts. When you set up an LLC you are in effect separating your business from yourself. By doing this you are helping to protect assets such as your personal savings and other property including your vehicles, bank accounts, home etc.
By forming an LLC, maintaining and operating it properly, you as well as any other members (owners of an llc are called members) involved should not be held personally liable for things that may go wrong during the course of business or any of the debts that are encountered. This means that personal assets of the members are protected and won’t be used as a way of settling business debts.
So just how exactly do you go about forming an LLC ? Believe it or not if you want to form an LLC you will find it to be a somewhat simple process and it may be one of the best things that you ever do for your business. In fact all you actually have to do is the following to make it legal and a reality:
First you will have to choose a name for your business. There are two important factors when it comes to doing this. The obvious one is you need to make sure the name you want is available and secondly you need to make sure that it complies with your state’s limited liability company statutes such as ending with LLC. Further, some words may be prohibited by your state such as bank or insurance.
Next you need to file formation documents with the state. These are usually referred to as the articles of organization or a certificate of formation, There is a fee to file the documents with the state and can range between $50 to $500. Once your LLC filing has been accepted by the state you should then create an LLC operating agreement. Within this agreement you should set out the rights and responsibilities of each of the LLC members.
Lastly a few states require that you publish notice that the LLC formation has been completed. Make sure to check if this is required by your state. Once this is completed you then simply have to obtain a Federal Tax ID Number (FEIN) as well as any licenses and permits that may be required for your type of business.
Look into forming your LLC today and obtain the protections and tax advantages that come with operating a business as an LLC.
About the Author
Michael Jagoda has been an online business owner since 1996 and currently owns and operates Start Biz Here a business incorporation and llc formation service. All Rights Reserved. Copyright 2010
(NOTE: blog content shown above may be linked and circulated freely on web sites, as long as ALL article content, links, author and copyright information remain UNCHANGED in any way whatsoever.)
As the name limited liability suggests the reason why so many business owners are deciding to form an llc is to reduce their personal liability. For example if you continue to operate your business as a sole proprietor or partnership you are personally responsible for any business debts and for lawsuit settlement obligations brought against your business. Simply put nearly everything you own could potentially be at risk and be used to settle business debts. When you set up an LLC you are in effect separating your business from yourself. By doing this you are helping to protect assets such as your personal savings and other property including your vehicles, bank accounts, home etc.
By forming an LLC, maintaining and operating it properly, you as well as any other members (owners of an llc are called members) involved should not be held personally liable for things that may go wrong during the course of business or any of the debts that are encountered. This means that personal assets of the members are protected and won’t be used as a way of settling business debts.
So just how exactly do you go about forming an LLC ? Believe it or not if you want to form an LLC you will find it to be a somewhat simple process and it may be one of the best things that you ever do for your business. In fact all you actually have to do is the following to make it legal and a reality:
First you will have to choose a name for your business. There are two important factors when it comes to doing this. The obvious one is you need to make sure the name you want is available and secondly you need to make sure that it complies with your state’s limited liability company statutes such as ending with LLC. Further, some words may be prohibited by your state such as bank or insurance.
Next you need to file formation documents with the state. These are usually referred to as the articles of organization or a certificate of formation, There is a fee to file the documents with the state and can range between $50 to $500. Once your LLC filing has been accepted by the state you should then create an LLC operating agreement. Within this agreement you should set out the rights and responsibilities of each of the LLC members.
Lastly a few states require that you publish notice that the LLC formation has been completed. Make sure to check if this is required by your state. Once this is completed you then simply have to obtain a Federal Tax ID Number (FEIN) as well as any licenses and permits that may be required for your type of business.
Look into forming your LLC today and obtain the protections and tax advantages that come with operating a business as an LLC.
About the Author
Michael Jagoda has been an online business owner since 1996 and currently owns and operates Start Biz Here a business incorporation and llc formation service. All Rights Reserved. Copyright 2010
(NOTE: blog content shown above may be linked and circulated freely on web sites, as long as ALL article content, links, author and copyright information remain UNCHANGED in any way whatsoever.)
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