If you’re considering starting a company and want to choose between an LLC and Inc. (corporation), here is what you should know about the differences. A limited liability company (denoted by L.L.C. or LLC) is a business structure that provides limited liability to its owners. This means the business is a separate legal entity and the owners (“members” of an LLC) are not legally liable for some acts and debts of the LLC. Inc. is short for Incorporated and denotes a C or S corporation. A corporation also offers liability protection but differs from an LLC in terms of ownership structure and rules, regulations they have to follow, management overhead and tax treatment of profits.
Before you can make any significant decisions about your small business, like expanding or bringing on employees, it’s important to set up the right structure for ownership and operations by incorporating your business.
Use These 6 Steps Incorporate Your Small Business
1. Using Digital Company Incorporation Services
There are several benefits to incorporating your small business, including protecting personal assets and attracting investors. But if you own a sole proprietorship or general partnership, the owner of the company is personally responsible for all debt obligations and legal obligations, without limitation. Without proper incorporation, it can be easy to lose your hard-earned money in a lawsuit. Professional incorporation services like https://sleek.com/sg/incorporation/ will take care of all these heavy-lifting tasks for you. Digital incorporation services offer a straightforward, low-cost solution for incorporating a company.
2. Choosing The Right Structure
Depending on your business needs, there are three common structures you can choose from when incorporating your small business — sole proprietorship, partnership, or corporation. Let’s look at the benefits of these structures.
- A sole proprietorship is a business structure in which you are self-employed or own a company, with no distinction between you and the company itself. The sole proprietor assumes personal responsibility for all aspects of the business, including legal obligations and debts.
- A partnership is an agreement between two or more people to run a business together. There are general partnerships, joint ventures, limited partnerships, LLCs based on ownership percentage rather than stock shares typically used by corporations for this structure, and LPs that use another form called “capital contribution” to share limited partnership profits.
- A corporation is a business structure that requires formalities, like holding annual meetings and keeping corporate minutes. Incorporating your small business will create an entity with limited liability between you and the corporation. This means shareholders are not personally responsible for the company’s debts or liabilities.
3. Registering Your Business In The State
Before you can incorporate your small business, you must register your company at the state level (or the equivalent of a state if you’re outside the US). Registering your small business allows you to legally operate and function as one specific type of business. This is typically done by filing business documents such as articles of incorporation, articles of organization, or doing a DBA (Doing Business As).
4. Meeting The Requirements For Incorporation
The requirements to incorporate your small business vary depending on where you live and which type of structure you choose. Generally speaking though, you will need a registered agent, a corporate name, a registered address, and time to complete your business formation. Requirements at the state level might include filing fees, annual report filing, additional registered agent fees ($50/yr), etc. It may also be more difficult to get a small business loan if you haven’t incorporated.
5. Keeping Your Small Business Safe
You can protect yourself and your business from lawsuits by making sure you have the proper insurance coverage in place. This includes general liability insurance, professional liability insurance, umbrella insurance, and additional rider protection for employees or contractors. You should also have a business attorney review any contracts with suppliers, vendors, partners, and addendums to existing agreements. Keep in mind that protecting yourself alone is not enough; you should consider asset protection plans for your family as well.
6. Handling The Accounting And Bookkeeping
Now that your small business is up and running, you’ll need to manage the day-to-day financials. Knowing how your business is performing financially will allow you to make the best decisions regarding expenditures, pricing, and hiring/firing decisions. In addition to bookkeeping software like QuickBooks, there are a number of online cloud accounting services that can help you manage finances from anywhere with an internet connection.
Why Is The Incorporation Of Your Business Important?
When you incorporate your business, it becomes a separate entity from yourself. This protects you from personal liability if someone sues your small business and wins. If your small business doesn’t have any assets (or sufficient assets) to cover the judgment awarded by the court, then that person cannot seize resources such as bank accounts or home equity to pay off the debt. It is important for all business owners to understand the benefit of incorporation because it can help protect them from major financial disasters in their life.
What Are The Benefits Of Incorporation?
The benefits of incorporation include limited liability and tax-free profits. The process of incorporating a business can be relatively simple. There are different types of corporations, so it would be best for you to talk to your lawyer about which one is right for your company. You should know that by law, every corporation must have at least one director and two officers (i.e., president and vice-presidential).