Incorporating: Setting Up a Corporation
Setting up a corporation or incorporating a business is easier than
you may think. We take a look.
In the past, incorporating a business has often been thought of as a complicated process, only to be
handled by qualified legal council. But, with the advent of the internet, it no longer has to be that way. Why
pay thousands to have a lawyer fill out forms that you can easily do yourself? If you’re a do it yourselfer
like myself you can find everything you need on the web and set up your corporation today.

The downside, of course, is that you won't be provided with live legal or financial advice. Most, if not all,
of your answers, however, can be found with a little bit of research online or via books. If you need legal
advice you should always consult an attorney. Chances are that you're perfectly capable of filling out the
online forms yourself, through one of the incorporating services featured online.

Some popular online business incorporating services:

MyCorporation, an Intuit Company

If you're looking for more detail, there are many good books available today
that can guide you through the entire incorporation process. Here are a few:

Whether you're setting up your corporation for a small or large business there
are three popular
business structures. Depending on your specific business
needs, a C Corporation, S Corporation, or Limited Liability Company (LLC)
may be right for you. Below are some pros and cons of the different
corporation types:

C Corporation

Corporate fringe benefits:
Offer the most fringe benefits of all the
structures. 100% deductions for
health and disability insurance. Full
deduction for medical expenses that may exceed existing coverage.
Stock options offering capital gains, favorable
life insurance, cafeteria
plans, pension plans, supper allowance, and more.

Increased workload and paperwork: Yearly stockholder meetings to
elect Board of Directors members. Yearly Board meetings to elect
officers and approve corporate issues. Additionally, you need to keep
corporate minutes.

Most expensive to operate: Must file two separate tax returns, one for
the corporation, and one for you, the individual. A few states, like California, have special corporate
taxes, which can significantly add to the tax costs. Double taxation is possible if plans aren't         
structured well in advance, increasing costs.

S Corporation

No double taxation:
Unlike the C corporation, income and losses flow through to the owners.

Social Security reductions: You can save up to 50% of your Social Security and Medicare
taxes. These benefits have made the S corporation a popular choice. The S corp is especially
beneficial if you're income is under the
Social Security maximum of $102,000 (2008).

Limits on qualifying: Fewer than 75 stockholders, all stock must be U.S. owned, must be a         
domestic corporation formed in the U.S., and only one class of stock.

Corporate bookkeeping: Much like the C corporation above, S corporations are classified as        
corporations and must have annual meetings. Board of Directors meetings, corporate minutes,
stockholder meetings, along with a separate corporate bank account are required.

Limited Liability Company (LLC)

Cheaper to start and operate than corporations:
One of the most popular choices for new and
small businesses. No Board of Directors meetings, corporate minutes, or stockholder meetings.
Typically provide more accounting flexibility than either C or S corporations.

Best asset protection: Limits liability for debts and other obligations much like a corporation. In
fact, limited liability corporations offer protection that may exceed that of a corporation.

Limited restrictions: Unlike the S corporation there are no limits to the numbers of members,
stockholders, or foreign investors.

Real Estate: The best entity to hold real estate of the three. The gains within the LLC are taxed at
the more favorable capital gains
tax rate. All C corporation gains are taxed at the corporate tax
level, which can be quite high. S corporations have their disadvantages as well.

No Social Security Savings: Don't share this benefit with S corporations. Subject to Social
Security much like a sole proprietorship. Not a big deal for those who plan on making over the
$102,000 (2008) Social Security maximum.

Required paperwork: Must file articles of organization with the state the LLC was formed in. The
most simple of the three, however. Some states may require LLC specific taxes. This may prove
disadvantageous, depending on your state.

All the above come with their pros and cons. Based on your unique business situation one of the above
entities may make more sense than the other. If you value flexibility and ease of operation, an LLC may
be the right choice. If you want to take advantage of the social security savings, an S corporation might
be appropriate. A C corporation may be more suitable for larger companies, and so forth. Incorporating
your business, whether big or small, can have significant tax and
liability protection advantages. Once
you decide on incorporating or forming an LLC, you can get started rather easily thanks to the large
number of online resources.
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