Business Incorporation
The Secretary of State in any locality in the United States allows businesses to incorporate, the process is fairly simple. The first step is to choose a name for your company or organization and to make sure that no other individuals have taken the same name. The second step is to submit a form to the Secretary of State and pay a fee. There are two types of corporations: C Corporations and S Corporations, the former is dedicated to enterprises that have an established tax structure, the latter is a passthrough entity that will not be taxed per say but where profits and losses will be transferred to the individual owner or owners.
Incorporating your business is a big deal, it means that you are committing to participating in your business actively and making sure that your employees have the appropriate work, salaries and benefits. Incorporating creates dilemmas for non-profits, as they can be conflicted in the process of making a profit and disregarding profits for the owner. When an individual incorporates, it is necessary to look at potential legal and taxation situations that may arise.
When choosing the right business structure, business owners should be mindful of what they are trying to accomplish and how they are trying to accomplish it. While incorporating may satisfy the individual’s desire to become an established business, there are other repercussions and passive consequences of the same. For example, having an office, processing payroll, attaining benefits for employees and staying compliant with the state, in this case the Secretary of State.
During the process of incorporation, not only is it important to have a unique name, but also to choose articles that will benefit the organization and which will support the goals of the same. Creating a business project starts with writing down a business plan and comparing different factors, otherwise called the S.W.O.T. analysis. Strengths, weaknesses, opportunities and threats are the basic terminology that a business owner should know. From this point, the business plan can be created and fulfilled in a manner that is efficient and which creates opportunities for others to participate in a substantial and organized manner.
Many times, business owners create entities for the sole purpose of image but this may not be beneficial to them and the public because the use of certain types of organizations are sometimes detrimental to business owners. Many individuals operate as sole proprietors, and this is perfectly fine if the business owner does not have any employees; however, when the business wants to employ individuals, an Employer Identification Number (EIN) is necessary, which can be attained from the Internal Revenue Service (IRS).
The IRS grants the benefit of an EIN to businesses that can demonstrate they have an enterprise which is ethical, absent of conflict and those which have a purpose of being a business. The IRS and the Secretary of State will deny the status of business structures based on profits, because when profits lack substance for three out of five years, the IRS will remove the status of business and will exchange it as a hobby.
Following the robust and strict regulations of the IRS is not only important but fundamental. Having an entity requires a mindset of compliance and of active participation in the entity. Desiring to have a business for the sole purpose of incorporating is not considerable and the tax, accounting and legal repercussions of having one should be visible to the owner and the shareholders of the organization.