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Incorporate a business FAQs

  • Should I form a corporation for my business?

    Yes, even if it is just for liability protection. Imagine you are an event organizer without proper insurance, and someone gets hurt at your event. In this situation, you might lose your personal assets and be personally liable, or responsible, for paying for damages. Or imagine you are self-employed and running a business as a sole proprietor and you end up saddled with a lot of business debt while revenue is low. In this case, you can be held personally liable for your business debt. For liability protection alone, it is worth setting up your own business entity.

  • Do I need a lawyer to form a corporation?

    No, you do not. However, it is recommended. If you are looking to form an S-corp or C-corp and have numerous contributing members, you may benefit from having a lawyer review your business documents. With a Rocket Lawyer membership, you can benefit from up to 40% off standard lawyer fees. We can also provide registered agent services in any state. Hiring a lawyer is not cost-prohibitive with a membership.

  • What are the advantages and disadvantages of forming a corporation?

    There are several advantages of forming a corporation:

    • Liability protection.
    • Ability to issue stock.
    • Possible tax advantages.

    Disadvantages of forming a corporation

    • C-Corps experience "double taxation."
    • Annual meetings are required.
    • S-corps can only have a limited number of owners.
  • Will acquiring funding be easier if my business is a corporation?

    It might. Investors most often want to know how your business is structured, who the financial contributors are, how revenue is handled, what debt is held, and more. The process of forming a corporation and writing a business plan can help you show potential investors the information they need to decide whether they want to invest in your company or not. If you have multiple owners, incorporating is highly recommended. If you are a sole entrepreneur, you should at least be prepared to share your business plan.

  • What type of corporation is right for my business?

    If you are looking to form a corporation, you should first decide what type of corporation you want for your company.

    Types of corporations include:

    • C Corporation - A type of business structure that provides members with liability protection and allows for flexibility in shareholder rights and ownership. This business structure is ideal for larger companies.
    • S Corporation - A type of business structure that provides members with liability protection. Income is passed through the corporation as personal income.

    There are also other types of business structures, such as an LLC or a Nonprofit, that may be more appropriate for other situations.

    Each structure has its own strengths, weaknesses, and tax implications. When starting your business, choose the business structure that best suits your needs, priorities, goals, and resources, as well as your long-term vision of where you want your business to be.

    Learn more about the benefits, limitations and requirements in S-Corp v. C-Corp: What Business Formation is Right For You?

    It is also important to remember that your current needs may not always remain the same. Some businesses end up changing their structure as a result of company growth. For example, many sole proprietorships expand into partnerships or corporations. Consider the future of your company in terms of both business structure and ownership: What will it look like in three, five, or ten years? What will happen to the business after you die? It's much easier to plan ahead for growth than to change business structures down the line.

  • In which state should I register my corporation?

    Does it really matter where you incorporate your business? Absolutely! Different states have different laws that affect corporations—some have well established reputations for being pro-business. Depending on your situation it pays to do your homework when it comes to determining the best place to incorporate.

    Here are the major choices to consider when selecting where to incorporate your business:

    Local: The majority of small business owners simply incorporate in the state where they are physically located. It is quick, convenient and may work fine for those small companies that conduct business in one state.

    Delaware: Delaware is pro-business and well known as the state of choice for companies that want to go public. Benefits include zero state corporate income tax for companies that operate outside Delaware, a special court established solely for business disputes, and very low incorporation fees.

    Nevada: Nevada is rapidly gaining a reputation as a business-friendly state thanks to near complete anonymity and favorable tax treatment, including:

    • Zero state tax on corporate profits
    • Zero state annual franchise taxes
    • Zero state personal income tax

    Dive deeper into this topic in Incorporating in Delaware or Nevada: What's the Best Option for My Business?

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