How to Incorporate
or Form an LLC
Reference Guide
Guiding You Every Step of the Way
LLC
S-Corporation
C-Corporation
© The Company Corporation and LLC.com. All rights reserved.
Table of Contents
Why The Company Corporation............................................................................................................................................1
How to Incorporate or Form a LLC....................................................................................................................................... 2
Step 1: Assess Your Needs....................................................................................................................................................... 3
Step 2: Choose a Business Name.......................................................................................................................................... 4
Step 3: Choose the State Where You Will Incorporate or Form Your LLC................................................................ 5
Step 4: Decide What Type of Company to Form (LLC or Corporation).....................................................................7
Step 5: For LLCs Only..................................................................................................................................................................8
Step 6: For Corporations Only.................................................................................................................................................9
Step 7: Let The Company Corporation Handle it for You........................................................................................... 11
Other Services The Company Corporation Can Help You With............................................................................... 13
© The Company Corporation and LLC.com. All rights reserved.
II
Why The Company Corporation
For more than 100 years, companies big and small have trusted The Company Corporation and its parent company,
Corporation Service Company, to meet their business compliance needs. We have offices in all 50 states and the District of
Columbia. We can prepare and file your formation and regulatory documents faster than anyone in the business.
The Company Corporation doesn’t just help businesses incorporate - we also specialize in helping customers meet their
compliance needs after they’ve incorporated. By working with thousands of customers over the years, we’ve learned the
“ins and outs” of compliance management. Our services allow our customers to focus on growing their business, while
we focus on their compliance requirements and the formalities of running a business.
For more information on The Company Corporation and how we can help you with any of the items in this guide, contact
us at any time using one of the following methods:
Website: www.incorporate.com
Phone: 866-963-7593
Email: [email protected]
***DISCLAIMER – The services and related information provided by The Company Corporation (TCC) do not constitute legal advice,
but rather serve as general information to help you manage your business. TCC is not a law firm and our services and information
are not a substitute for the assistance of an attorney or financial advisor.
© The Company Corporation and LLC.com. All rights reserved.
1
How to Incorporate or Form a LLC
Dear Business Owner,
Congratulations! By requesting this guide from The Company Corporation®, you’ve taken the first step toward incorporating your business. As you may know, thousands of business owners around the country each day put their personal assets
at risk by operating as sole proprietorships. Incorporating or forming a limited liability company (LLC) is an easy, fail-safe
way to separate your personal assets from your business assets. When we refer to “incorporating,” we mean the act of creating a new corporation or the formation of a Limited Liability Company (LLC) under the laws of a particular state.
This guide will help you understand the benefits of incorporating, the differences between corporations and LLCs, and the
process for forming your own business. We promise to make that process as smooth as possible. We’ve helped hundreds of
thousands of business owners just like you reach their goals. Visit us online at www.incorporate.com or call 1-800-209-0128
to speak with a Business Specialist over the phone for more personalized service.
Let’s get started.
Sincerely,
David Gilardi
P.S. Keep in mind that The Company Corporation is a service company and does not provide legal or financial advice.
© The Company Corporation and LLC.com. All rights reserved.
2
Step 1: Assess Your Needs
You’ve come up with a great idea for a business, and written a solid business plan. Now what? It’s time to choose the
legal form of your business. This choice matters from Day One—selecting the right form of business can protect you
from tax liabilities and potential legal problems.
This may sound easy, but the most obvious form of business isn’t always the right one for you. For example, even if you’re
a solo business owner with no partners or employees, forming a sole proprietorship isn’t necessarily the wisest decision.
Before you investigate the business entity options available to you, whether sole proprietorship, general partnership,
corporation or LLC, here are some things to think about.
Issues to Consider
Yes
No
1. Do you want to protect your personal assets (your home, car, savings, etc.)?
2. Does your business sell goods or services to the public and/or other businesses?
3. Does your business bring customers into your store, office or home office?
4. Are you entering into a business with family or friends?
5. Do or will you have employees?
6. Do or will you have business partners?
7. Do or will you have investors and shareholders?
8. What kinds of shareholders do you want in your business? Will they have decision-making power?
9. Would you like the option to raise capital through the sale of stock?
10. Do you want to be able to deduct business expenses?
Take notes as you consider these questions. This will make it easier to start the process of incorporating or forming an
LLC by calling a Business Specialist at 1-800-209-0128 or visiting us online at www.incorporate.com.
© The Company Corporation and LLC.com. All rights reserved.
3
Step 2: Choose a Business Name
The name of your business can mean the difference between success and failure. In today’s global market, where Internet
searches and social media are key to a company’s marketing strategy, a business name that’s hard to remember, say or spell
can cripple your new company before it ever gets off the ground..
As you evaluate possible business names, ask yourself:
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Does this name convey what my company does?
Will this name appeal to my target customers?
Does this name reflect the brand image I’m seeking to create?
Will the name carry my company through the years if I decide to expand or shift focus? (Planning ahead is why
Jeff Bezos called his company Amazon.com, and didn’t include the word book in his company name.)
Once you have a name in mind, the next step is making sure no one else is already using it. Today’s customers go online
first when looking for a business—and that’s what you need to do, too. Ideally, you want to own your business name as
your domain name (or URL). Visit GoDaddy.com to see if your chosen business name has already been registered or if
it’s available. If the domain name is not available, you may want to consider a different business name that is available.
After purchasing your URL, it’s time to register your business name with your state. Every state has its own set of procedures
to follow; visit your state’s Secretary of State website to learn more. You will probably need to file a DBA (Doing Business As),
too. DBAs are used by sole proprietors and general partners who want to do business using a name other than the owners’
personal name. Even if you plan to incorporate your business or form an LLC, most banks require a DBA in order to open a
business bank account. The Company Corporation can help register your name in your state and complete DBA registrations for corporations, limited liability companies (LLCs), and some sole proprietorships and partnerships. Call our Business
Specialists at 1-800-209-0128 or visit us online at www.incorporate.com for assistance.
Registering your business in your state is not enough to protect your business name. You must also trademark your
name with the U.S. Patent and Trademark Office before someone else does. If you don’t and someone else trademarks
or begins using the same business name, you could lose the rights to your name. That means you’ll have to change your
business name and start all over with your branding process. The Company Corporation can also guide you through a
trademark search. Simply call a Business Specialist at 1-800-209-0128 or visit us online at www.incorporate.com for help.
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4
Step 3: Choose the State Where You Will Incorporate or Form Your LLC
The state where your business is physically located (or headquartered, if you will have locations in multiple states) is your
“home state.” However, some business owners choose to form a corporation or LLC in a state other than their home state,
such as Nevada or Delaware. You may want to incorporate outside your home state in order to enjoy lower corporate tax
rates or a simpler incorporation process, for instance.
However, incorporating or forming your LLC in another state doesn’t release you from meeting your tax and legal obligations in the state in which you do business. To be sure you don’t land in hot water, become familiar with your home state’s
tax laws. Consult the Business Specialists at The Company Corporation for help; simply call 1-800-209-0128.
Once you’ve chosen the state where you will incorporate or form your LLC, here are some additional documents you may
need:
Business License: Just about every business needs a city or county business license to conduct business legally. There may
also be state or federal licensing requirements, depending on your type of business. Fees vary depending on your location,
so check with your city or county’s business license department to see what licenses are required. If you’re running your
business from home, you also need to make sure your neighborhood is zoned for a home business. Even if customers won’t
visit your business and you use a post office box as your business address, you’ll need to register a street address and pay
the licensing fees for that city.
State License: State licenses are usually required for personal or professional service businesses like accounting, contracting or cosmetology that have specific industry standards. Depending on the nature of your business, you may need to
register with the state to collect and pay sales or use taxes. Check with your state’s Secretary of State website to see what
state licenses your business needs.
Federal License: Federal licenses are required for businesses that are highly regulated by the federal government, such
as ground transportation, preparing meat products, manufacturing alcohol or tobacco or providing investment advice.
Contact your industry association or visit the Small Business Administration website at www.sba.gov for more information
on federal business licenses.
DBA: If you’ve chosen to have an alternate business name, called a Doing Business As (DBA), you’ll need to register the DBA
with your state and local government. You need to file the DBA so you can legally conduct business under a different name
than what’s on your original incorporation documents.
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5
EIN or Tax ID: Think of an EIN (Employer Identification Number) or Tax ID number as your business’s Social Security number. It identifies your business on government documents and is necessary if you have (or plan to hire) employees, operate
as a corporation or partnership, file tax returns or offer any sort of retirement plan. In addition, other businesses will often
require that you have an EIN in order to do business with them.
Certificate of Good Standing: Also known as a “Certificate of Existence” or a “Certificate of Authorization,” this document is proof your company is authorized to transact business in its home state, is in compliance with state laws and
regulations, is up to date on all payments owed to the state and has filed all required documents with the state. Find
out how to apply by visiting your Secretary of State’s website or searching online for the Department of Corporations
in your state.
The Company Corporation can help you obtain all the documentation your business needs, including business licenses,
a Certificate of Good Standing, and an EIN or Tax ID. Simply contact our Business Specialists at 1-800-209-0128 or visit
www.incorporate.com and sign up to have The Company Corporation file the proper forms and applications for you.
© The Company Corporation and LLC.com. All rights reserved.
6
Step 4: Decide What Type of Company to Form (LLC or Corporation)
Selecting the right legal structure from the beginning of your business can save you headaches and financial hassles down
the road, so choose wisely. Both corporations and LLCs offer protection from personal liability in case of business bankruptcy
or judgments against your company, but there are some significant differences. Corporations and LLCs provide tax savings
as well. Consult with your tax adviser to determine how your tax liability may improve. Here are some key points to know.
A corporation must file articles of incorporation with the state. The owner and shareholders are not personally or financially
responsible for the debts or responsibilities of the corporation. The shareholder is responsible only for his or her investment; however, if there are any dividends, the shareholder may be taxed on profits received. The corporation pays taxes on
its profits and can claim business losses on its tax returns. Corporations can take tax deductions for offering benefits such
as health insurance, life insurance and retirement plans, as well as for business travel and entertainment.
As a separate legal entity, the corporation will continue to exist even after the death of a shareholder or transfer of the
shareholder’s shares. Because the corporation is a “permanent” structure, incorporating adds credibility to your new company, especially when you’re trying to woo investors or lenders. The corporate structure also protects any shareholders
from personal liability, which can make investing more attractive to them.
A Limited Liability Company (LLC) must file similar articles of organization with the state, but offers a more flexible management structure than does a corporation. Unlike a corporation, profits and losses “pass through” the LLC and are reported on each owner’s individual tax return. Since outside shareholders may not appreciate this taxation, especially if they
are not realizing any dividends from the business, the LLC is better suited to a business where all shareholders are actively
involved in operations. If there is only one owner, the company’s income can be reported on the individual’s Schedule C. If
there is more than one owner, the individuals are treated as a partnership for tax purposes and file Form 1065.
At a Glance: LLC vs. Corporation
Advantages of a Corporation
Advantages of a LLC
No limit on the number of owners.
May issue shares of stock to attract investors.
Profit and loss are passed through to the owner’s
individual tax returns.
Corporate income splitting may help lower
overall tax liability.
No annual meeting or minute book requirements.
Disadvantages of a LLC
Disadvantages of a Corporation
Cannot engage in corporate income splitting to
lower tax liability.
Double taxation of corporate profits and
shareholder dividends.
Cannot issue stock.
Must hold annual meetings and record minutes.
S Corporations have restrictions on number
of owners.
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7
Step 5: For LLCs Only
After comparing business entity options, many business owners choose to form a limited liability company (LLC). Like
a corporation, an LLC is a good way to “wall off” your personal assets from your company’s liabilities, offering protection
for your personal assets in the event of a judgment against your business. For this reason, it’s a better fit for many one- or
two-person businesses than a sole proprietorship or a general partnership.
In addition to the tax advantages mentioned earlier, an LLC also offers more operating flexibility than a corporation. In many
states, LLCs can be organized and operated however the business owners wish. You can decide which corporate characteristics you want, which tax structure you want to use, and which rules and regulations to follow in your business operations.
Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals,
corporations, other LLCs and foreign entities. There is no residency requirement, so owners/members need not be U.S.
citizens or permanent residents. There is no maximum number of members, and most states also permit “single member”
LLCs (those having only one owner). All of this can offer greater flexibility if you are hoping to raise capital from investors.
In addition, partners, suppliers and lenders tend to look more favorably on your business when you’ve formed an LLC.
Use the Business Startup Wizard or call the Business Specialists at The Company Corporation can help you determine if
an LLC is right for you. Just call 1-800-209-0128 or visit www.incorporate.com.
LLC Terms to Know
Articles of organization: Also known as articles of formation, this is the document you must file
in many states to register a limited liability company (LLC).
Domestic limited liability company: A limited liability company organized under the laws of
the state in which the LLC plans to conduct business. See foreign limited liability company.
Foreign limited liability company: A limited liability company organized under the laws of a state
other than the state where it plans to conduct business. See domestic limited liability company.
Member: The owner(s) of a LLC.
Operating agreement: The contract among the members of the LLC that guides the company’s
membership, how the business is managed and operated, and how income is distributed.
Single member LLC: A LLC owned by one person or entity. The Internal Revenue Service treats a
single member LLC as a “disregarded entity,” meaning the entity does not file a return and all profits
and losses are reported on the LLC member’s return.
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8
Step 6: For Corporations Only
C Corporation
The most common type of corporation in the U.S. is the C Corporation. By forming a C Corporation, business owners create a
separate legal entity that helps shield their personal assets from judgments against the company. The C Corporation
structure includes shareholders, directors and officers.
The advantages of a C Corporation include:
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Limited liability for directors, officers, shareholders and employees
Perpetual existence, even if the owner leaves the company
More credibility among suppliers and lenders
Unlimited growth potential through the sale of stock
No limit on the number of shareholders, although once the company has $10 million in assets and 500 shareholders,
it is required to register with the SEC under the Securities Exchange Act
• Certain tax advantages, including tax-deductible business expenses
The C Corporation structure does have some drawbacks. For instance, a C Corporation’s profits are taxed when earned and
taxed again when distributed as shareholders’ dividends; this is known as “double taxation.” Shareholders in a C Corporation
can’t deduct any corporate losses. If you want those deductions, you may prefer to form an S Corporation instead.
S Corporation
An S corporation pays no federal income taxes; instead, the business’s income and losses are passed through to shareholders,
who must then report the income and losses on their personal tax returns. This method is considered “single taxation.”
While it may sound smarter to form an S Corporation so you are taxed only once, S Corporation shareholders are taxed
for any income the company has, even if they did not receive a portion of that income. (A C Corporation shareholder, in
contrast, is taxed only if dividends are issued.) Also, S Corporation officers must be paid a “reasonable salary” even if the
company is not making a profit. An S Corporation may pay owner/employees dividends as well as a “reasonable salary”
which may lower the owner/employee’s payroll taxes.
Not every business can register as an S corporation. Here are some requirements:
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The company must have a minimum of one shareholder and a maximum of 100 shareholders.
The company can have only one class of stock.
All shareholders must be U.S. citizens.
The company must incorporate as a regular corporation in its home state, then file IRS Form 2553 to choose
status as an S Corporation for federal tax purposes.
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9
Need more help determining whether an S or C Corporation is right for you? Call a Business Specialist at 1-800-209-0128
or visit www.incorporate.com.
Corporation Terms to Know
Articles of Incorporation: Also called the certificate of incorporation or corporate charter, this is
the document you must file in many states to incorporate.
Bylaws: The rules adopted by the corporation that govern its actions and the rights and duties of
corporate members and officers.
Foreign corporation: A corporation that is formed in one state or country but does business in
another state or country.
Minutes: Corporate minutes are written records of actions taken or authorized by a corporation’s
shareholders or board of directors.
Shareholders: Shareholders (also known as stockholders) are the owners of a corporation based
on their holdings. They own an interest in the corporation rather than specific corporate property.
Voting Rights: The shareholders’ rights to vote their shares, which are governed by laws as well as
by the corporation’s bylaws and articles of incorporation.
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10
Step 7: Let The Company Corporation Handle It for You
Incorporating or forming an LLC can be complex, and let’s face it, at startup, don’t you have a lot of other challenges to
worry about? Let The Company Corporation make it easy for you. Simply call our Business Specialists at 1-800-209-0128
or fill out the order form at www.incorporate.com. We’ll handle the rest. The Company Corporation will prepare all the
documents you need to form a corporation or LLC, review them for accuracy and submit them to the state for you. When
the state returns your official LLC or corporate documents to us, we’ll review them for accuracy again before forwarding
them to you. It’s easy, fast and affordable.
Get the $50,000 Corporate Veil Guarantee!*
The Company Corporation is the only company that provides a $50,000 Corporate Veil Guarantee.* Simply follow our
step-by-step guide after you incorporate or form your LLC, and if your company is sued and your corporate veil is pierced,
we’ll reimburse you up to $50,000 in legal fees.
Simply choose the package that is right for your needs and budget. Payment is easy—we accept credit cards, checks
and money orders.
Step 7: Choose a Package
The Starter (starting at $99)
We complete and file the Articles of
Formation for your new company.
The Essentials (starting at $399)
The Works (starting at $899)
Includes everything in The Starter
package plus:
Includes everything in The Starter and
Essentials packages plus:
Company name search and
reservation.
1 full year of access to Compliance
Watch, an online compliance
management tool.
6 month of access to Compliance
Watch, an online compliance
management tool.
1 full year of Registered Agent
service.
Compliance Organizer and
corporate seal.
6 months of Registered Agent
service.
$50,000 Corporate Veil Guarantee.TM
Exclusive offers from trusted
partners.
NOLO Publications – “Your LLC – An
Operating Manual”, “The Corporate
Minutes Book” or “How to Form a
Nonprofit Corporation.”
1 year of Business Coaching or 501C
filing for Nonprofits
Federal Employer Identification
Number (EIN)
Business License Compliance
Package, a custom research report
detailing your business license
requirements
Corporate Bylaws or an LLC
Operating Agreement.
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11
If you have any questions, a Business Specialist will be happy to answer them for you. Just call 1-800-209-0128.
*View “Corporate Veil Guarantee” details, terms and conditions at our website, www.incorporate.com.
Congratulations! You’re ready to “form a business entity.” Simply put, you’re ready to go through the process that enables you to legally add “Inc.” or “LLC” to your business name. Not only will this help strengthen the credibility of your
new business, it will also help protect your personal assets and can provide tax advantages.
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12
Other Services The Company Corporation Can Help You With
After you form your corporation or LLC, there are many rules you must follow and documents you must file to remain in
compliance and keep your corporation or LLC in good standing. The Company Corporation can guide you at every step
of the way. Here are some of the services we can help you with as your company grows:
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Obtaining an Employer Identification Number (EIN).
Obtaining a Business License.
Continuing Registered Agent Service.
DBA/Fictitious Name.
Trademark Search
Registering your business with other states or a Foreign Qualification
Corporate and LLC Amendments
Operating Agreements
Bylaws
Compliance Coaching to help you follow state rules and regulations
Corporate kits and supplies for your existing corporation or LLC
Certified copies of corporate and LLC documents and certificates including:
Certificates of Good Standing
Corporate or LLC Amendments
Articles of Incorporation or Certificate of LLC Formation
Annual Reports
Apostilles for Hague Convention countries
Cancellation or Dissolution
For more information, or to order the services above:
Visit us: www.incorporate.com
Call: 1-800-209-0128
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13
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Wilmington, DE 19808
TOLL FREE
800-209-0128
PHONE
302-636-5430
FAX
302-636-5454
WEB
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®
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