How to Incorporate a Business: A Step-by-Step Guide

Incorporating a business in the US gives you access to an incredible array of business opportunities. Corporate profits across the country increased by 5.7% in the third quarter of 2017.

And, contrary to what many people think, you don’t need to be a US citizen to incorporate a business in the US. In fact, foreigners can incorporate with ease.

So, what can incorporation do for you?

• Give you access to the world’s biggest economy.
• Provide you with the credibility of owning a US-based business.
• Allow you to take advantage of a friendly low tax system.

For the newcomer, understanding the system of doing business in the US can be tough. That’s why I’m here to guide you through the process.

By getting in touch with me at sam@mollaeilaw.com you’ll find out how to incorporate a business and how to do it in a way that maximizes your benefits.

With that in mind, here’s your guide to forming a company in the US.

 

Step #1 –Decide on the Correct Business Type

The right business type depends on whether you’re a US citizen. Most people will choose between either an LLC or an S-Corp.

For the purposes of this section, I’m going to split it up to offer a detailed overview of each major type of business you’ll likely be considering.

 

The LLC

If you want to start a US business, the Limited Liability Company (LLC) is the most common type of business to choose for the non-citizen.

The big advantage of the LLC is the limited liability protection it provides. Like the S-Corporation, any taxes are paid not through the business but your personal tax return, which is otherwise known as pass-through tax.

Why is the liability protection so important?

The answer is in protecting your personal assets. If someone sues you the only assets exposed are those of the business, rather than the business owner.

So, what are the benefits of an LLC?

• You can own real estate through this type of business.
• Management flexibility. You decide the structure of the business.
• It doesn’t come with the formalities of corporations.

 

S-Corporation

The S-Corporation, or S-Corp, is a type of incorporation that involves establishing a business then filing to transform that business into an S-Corp through the IRS.

You’re a corporation but you can still take advantage of pass-through taxation. Therefore, the business doesn’t suffer from double taxation.

There are also the same personal liability advantages you would expect.

The benefits of an S-Corp are:

• Benefit from corporate business advantages, along with pass-through taxation.
• Flexibility in accounting methods.
• File an informal tax return so there is a reduced chance of an IRS audit.

This is the best choice for US citizens. It’s relatively easy to set up and provides you with advantages you’re not going to find with other business types.

Keep in mind non-citizens cannot form an S-Corp because all shareholders must be US citizens.

 

C-Corporation

The C-Corporation is the most common type of corporation established under state law to protect the owner from creditor claims.

Any corporation that incorporates is already considered to be a C-Corp. And for tax reasons, it’s considered to be a separate taxpayer.

The corporation pays the taxes and expenses associated with doing business. Owners are paid via distributed dividends.

This is largely just an option for bigger businesses as double taxation does exist with this business type. For larger incomes, this can be quite profitable than other corporation types, though.

We don’t recommend using the C-Corp option.

Only bigger companies can benefit from the C-Corp. The average small business will not reap the benefits.

If you want help deciding on the right business type for you, get in touch with me at sam@mollaeilaw.com. I’ll examine your situation and provide you with expert advice on which business structure works best.

 

Step #2 – Which State Do You Want to Incorporate In?

The best state to incorporate in is usually the state you intend on doing most of your business. But there are exceptions to this rule.

Why do you want to stick to the state you intend on doing business in?

The reason for this is that businesses incorporated in a different state than the one they’re doing business in will be classified as a foreign entity. They’ll have to pay for separate licenses to operate in every state they want a presence in.

But there are exceptions, such as if you primarily deal online. States like Delaware, Nevada, and Wyoming are popular favorites.

Which state is the best one?

The reason why I always caution against focusing on states like Delaware is that great business advantages are not aimed at small businesses.

They’re aimed at large corporations.

There’s little point in following what the Fortune 500 does because they have different responsibilities and different business structures. Income levels do change the needs of your business.

I advocate looking at what each state offers the small business. Massive tax relief for corporations simply isn’t relevant to the average business.

It’s something I regularly tell my clients about because incorporating in Delaware or Nevada if it isn’t right for you is a costly mistake.

This is a difficult decision to make, though. That’s why you shouldn’t make this decision without consulting with a professional first.

I can assess your business and provide you with some informed advice. Contact me at sam@mollaeilaw.com to figure out which state you should incorporate a business in.

 

Step #3 – How to Incorporate a Business in the US?

The rules on incorporation differ for every state, but you’ll nearly always have to complete articles of incorporation, perform an initial company assessment, and get a business license.

But it all depends on the state you want to do business in.

The paperwork is relatively simple to fill out. It mainly involves choosing a name for your company and detailing what your company does.

For smaller businesses, this is relatively easy as you won’t need to worry about the formalities of the C-Corp. But the business licensing aspect can be tricky.

Most states require you to have a basic business license to even operate as a business from home. One example of a state like this is California.

You should always talk to a professional who knows the rules to determine which business licenses you’re likely to need.

I can help with that. I’ve spent years helping businesses comply with the rules of doing business in the US. Send me an email at sam@mollaeilaw.com today and let me help you establish what you need to incorporate a business in the US.

 

Step #4 – Get your Employer Identification Number (EIN) to Incorporate a Business

Your EIN identifies your business to the IRS and every business must have one to operate. There are two processes in place for citizens and non-citizens.

Citizens can easily get their EIN through their social security number by applying through the IRS. The process is easy, and you can do this part alone.

Non-citizens, however, need a registered agent to be able to get their EIN. And this is where it can get complicated for foreigners who want to incorporate a business.

Hire a business lawyer like me. I will act as your third-party designee and apply for your EIN on behalf of your new business. All you have to do is send me an email at sam@mollaeilaw.com to get the process started.

All the paperwork will be filled out and a qualified business lawyer always gets the process done faster. There will be no mistakes and therefore no delays.

This is one part of the process that applies regardless of the business type and state you choose. Any company that wants to open a bank account needs one.

 

Step #5 – How to Open Your Bank Account in the US to Incorporate a Business

Once you have your EIN you can open your bank account. This is necessary to establish yourself as an authentic business in any state.

The banking part of the process always depends on the state and the institution you decide to choose. It’s not a process to take lightly.

Do your research and make sure you apply for your bank account via a qualified business lawyer. This will make it more likely that your application is accepted.

It’s especially important to appear as credible as possible these days. With concerns following the 2008 financial crisis, banks have tightened their rules on new clients.

 

Step #6 – How Long Does It Take to Incorporate a Business?

The time it takes to incorporate a business depends if you try to incorporate it alone or with professional help. It can take anywhere from a couple of days to an entire month.

Generally, the fastest way is to apply through a business lawyer like me. Lawyers lend credibility and can use their contacts to fast track applications for their clients.

Individuals who attempt to apply traditionally make mistakes and end up having to complete paperwork multiple times.

Applying alone may be the cheapest way to incorporate a business. However, time is money, so you need to decide if it’s worth it to save a few dollars.

What about if your business needs to incorporate in multiple states?

Understand that in the US a company from another state is a foreign entity. They need to apply for various licenses to operate in other states.

This is why every company doesn’t simply incorporate in business havens like Delaware or Nevada. It’s a rule to encourage companies to establish themselves in their home states.

In this case, you do need a business lawyer who can handle the filing requirements of multiple states at the same time.

Imagine if you could form a US company and have it licensed to operate in multiple states in less than a week. That’s what you get when you hire a business lawyer like me to do it for you.

 

Step #7 – Budget to Incorporate a Business in the US

The cost to incorporate a business in the US will vary depending on the state. But as an average, you can expect to pay a couple of hundred dollars minimum.

There are various costs involved and it’s impossible to list them all for every state here. These are the main costs you’ll have to consider:

• The filing fee for articles of incorporation.
• Service fee for the initial company report.
• Cost of business licenses.

Your costs can also go up if you want to operate in multiple states. Therefore, you need to talk to a business lawyer who can examine your specific situation.

Is it worth spending more to have a business lawyer incorporate your business for you?

The incorporation process for companies in the US, particularly if you’re a non-citizen, can get tough fast. You need someone who knows the system, or the process can take weeks and months.

Talk to me about what you need from your business in the US today and I’ll help you through the process.

 

Step #8 – Incorporate a Business but Remember Your Annual Responsibilities

No matter which state you choose to incorporate in you must consider your annual responsibilities. These include filing your taxes and any other license renewals that some states require.

Generally, you can have an accountant manage this process for you. Your business lawyer can also make sure that the relevant forms are filed without any hassle.

These responsibilities will also determine which state you incorporate a business in, to begin with.

It’s not just important to get a business lawyer for the initial incorporation process. You need one to handle your annual filing requirements.

 

What To Do Next

Forming a company in the US is never easy if you’ve never done it before. But I can make sure that this is a process made easy.

You need to not only file the correct paperwork but make an informed decision with regards to where you incorporate it in the US.

I can simplify this and give you the right advice.

All you need to do is email me today at sam@mollaeilaw.com and I’ll guide you through the process step-by-step.