There are mutliple reasons for becoming incorporated. One of the main reasons is to bypass additional taxes and create a wall of liability between the owner of such company and the public. The preferred incorporation is an “S” Corp which allows the profit or loss to “flow through” to the owners tax returns on a Schedule K-1. By incorporating with this method, you eliminate double taxation. In addition to the tax advantage, a corporation has more write-offs than a sole proprietor. Although this is not inclusive these are some of the main reasons for becoming incorporated.
The requirements for incorporation are different for each state. At a minimum, each state will require at least organizational paperwork such as by-laws and such. They will require some kind of fees and depending on the type of business they will require your licenses to be in order. Your business will have to file paperwork with the IRS to get an federal identification number (FEIN) and a determination on what type of business you are creating (Corporation, “S” Corp, LLC). Finally, once the state and federal government paperwork has been filed, you will need to search your local county or city ordinances to see what paperwork must be filed and what fees must be paid. Once you have satisfied these requirements, you will want to be prudent and set up bank accounts, insurance needs, and other professional services to get your business off the ground in the right direction.
If you need additional clarification or would like to set up a company, please contact our office at (239) 313-7129 or visit our website at http://www.jbrooksai.com/accounting/new-business-formation/ and we will be happy to assist you in your endeavours.