What does it mean to incorporate?
Incorporating a business means turning your sole proprietorship or general partnership into a company formally recognized by your state of incorporation. When a company incorporates, it becomes its own legal business structure ─ set apart from the individuals who founded the business. Through incorporation, the company's owner or owners create a separate legal entity to transact business. This new business entity ─ corporation or limited liability company (LLC) ─ transforms the way the business is seen through the eyes of the law and often has more credibility with potential customers, vendors and employees.
How does incorporation work?
Wondering how to incorporate a business as a C corporation or S corporation or how to form an LLC? Here are some of the steps included in the process:
- Determine where you want to incorporate.
- Decide which business type is best for your business and goals. Consult with an attorney or accountant.
- Determine who the directors of the corporation or who the members/managers of the LLC will be.
- Select a registered agent. Your registered agent must be listed on your Articles of Incorporation or Articles of Organization. The registered agent is appointed by you to receive important legal and tax documents on behalf of your business and forward them to you. BizFilings includes this service in all incorporation packages.
- Prepare and file the Articles of Incorporation or Articles of Organization per instructions from the Secretary of State's office. BizFilings handles this step for you, allowing you to concentrate on running your business.
Why is incorporating a business important?
The primary benefit to business incorporation is limited liability. When you own a small business, you will invest a lot of money into not only getting it launched, but in keeping it running smoothly as well. As the owner you are responsible for any debts and losses your business may accumulate along the way. However, when you incorporate, you are typically only held responsible for the amount of money you personally invest. Your personal assets typically cannot be used to satisfy the debts and liabilities of your business.
View our Benefits of Incorporation or Benefits of Creating an LLC article to learn more about this and other benefits of incorporating a business.
For a comparison between multiple incorporation types view our article
Which Business Type is Right for Me? C Corp, S Corp, or LLC to help with your decision.