Every business has a unique structure that determines its specific needs. Hence, when an aspiring entrepreneur is looking to start a business, he/she must consider the business idea, the timeline and most importantly the amount of capital he/she has in hand,
get a clear understanding of the different business structures and how each one impacts the amount of payable taxes and daily operations. The most popular business structures, preferred by those looking to start small-scale businesses, are Limited Liability Companies (LLCs), which require a registered agent but can be owned by one or more people or companies; Limited Liability Partnerships(LLPs), which are similar to LLCs but are mainly used by licensed business professionals and require a partnership agreement; Sole Proprietorships, in the case of which, the solo owners are personally responsible for all business debts if the businesses fail; Corporations, especially S Corporation, which gives businesses, that meet specific IRS(internal revenue service) requirements, access to limited liability, unlimited company lifespan, and flexible income options.

However, gaining the investors’, vendors’ and customers’ trust often becomes comparatively easier for incorporated companies. Hence, many small business owners, looking to take their businesses to the next level, prefer to upgrade their companies to corporations. Starting a corporation means creating a business that has its own legal identity. Incorporating a small business separates business assets, liabilities and income from the business owner’s/s’ personal assets. Besides, entrepreneurs who have incorporated their companies enjoy benefits like lower corporate tax rates, stock-selling capability, easy ownership transfers etc. As every coin has two sides, corporations come with advantages as well as disadvantages. Though incorporating a small business involves start-up costs, legal expenses, accounting expenses, and annual fees, it offers benefits like limited liability, unlimited company lifespan and flexible income options. But, one must know the right way to incorporate a small business.

Steps to incorporate a small business:

Pick a suitable business name.

The name of the business should give an idea of the business’s primary offerings. Also, the name should be easy to understand and remember for the target audience. For example, if the TG(target group) is primarily college students, the name should be youth-centric. Also, before finalizing a name, one must check with the state’s corporate filing office, and federal and state trademark registrars to ensure the availability of the particular name.

Choose a state for incorporation.

Though the business owner doesn’t necessarily need to select his/her home state as the headquarter, sticking with the state where he/she lives or expects to conduct the business often turns out to be a comparatively easier process when it comes to incorporating a company. However, one must consider the cost of incorporation, taxation and corporate laws of the state, in which the business is getting incorporated.

Select the most suitable type of corporation for the business.

Primarily, there are three types of corporations and each has a unique structure, advantages and disadvantages. Hence, one needs to gain ample knowledge of all three and then analyze which one best fits the business and the owner’s/s’ priorities. However, as Limited liability companies (LLCs) are quite similar to corporations, they often come under the same umbrella.

I. C Corporation

This type of corporation best suits large companies. C corps are capable of opening bank accounts, taking legal actions, establishing credit and buying business properties.

II. S Corporation

It is one of the best business structures for small businesses. S corps are permitted to comprise not more than 100 shareholders. In the case of S corps, the shareholders only get taxed once on their personal tax returns.

III. Non-Profits

The non-profit structure is selected by foundations or organizations like NPOs, which are not looking to make profits.


Similar to S corps, LLCs permit pass-through taxation, besides, giving personal liability protection to owners, which safeguards the personal assets of the owners, in the case of bankruptcy, loan defaults or legal actions from third parties. When it comes to forming an LLC, the business owner requires to file articles of organization instead of articles of incorporation.

Select the company directors.

Selection of directors is quite a crucial activity as a corporation requires a board of directors, who will be responsible for running the company and taking vital business decisions.

Decide on the type of shares the company will sell to stockholders.

Business owners looking to incorporate their companies must choose the type of shares that will be available for their stockholders to purchase. In the case of private corporations, the availability of shares is limited to the directors.

Get a registered agent.

A registered agent, who is responsible for accepting mail from the state on the corporation’s behalf, can be a person, company, or business attorney. If the registered agent is a business attorney, the office of the business attorney must be located in the state where the company is incorporated. However, one of the in-house employees or the owner himself can also be delegated as the registered agent.

Draft and submit articles of incorporation.

hese are the official documents that business owners need to submit to the state to incorporate their companies. These primarily comprise the name, purpose and location of the business. Also, these comprise the names of the board members. Blank documents for writing articles of incorporation can be accessed from the state’s corporate filing office or online at the state’s government website. A filing fee, which usually varies with state, needs to be paid to file the drafted article.

Make sure the business meets additional federal and state requirements.

Business owners need to file an Employer Identification Number (EIN), also known as a Federal Employer Identification Number, which the Internal Revenue Service (IRS) uses to identify companies for tax purposes and open a business bank account to legally operate their businesses