Choosing to Incorporate
When starting a business there are a few options when it comes to what type of business entity you’d like to form. Most businesses begin as sole proprietorships or general partnerships before making the decision to form either corporations or limited liability companies (LLCs). Before making the decision, you should determine which option will best serve you and your business goals.
The most universally appealing benefit of incorporating is limited liability protection. When your articles of incorporation have been filed, your business becomes its own separate entity. This draws down the corporate veil that will protect your personal assets in the event of legal action against your business. LLCs provide the same limited liability protection as corporations.
How your business is taxed is another vital consideration when choosing the right entity for you. Both LLCs and S corporations use pass-through taxation, with owners or shareholders reporting earnings and losses on their personal tax return. C corporations, on the other hand, are taxed at the flat corporate tax rate of 21%, with dividends subject to both corporate and personal taxation.
Each business structure comes with both advantages or disadvantages depending on your particular situation. When making your decisions you should consider factors like your personal marginal tax rate, how many members or shareholders you plan to have, what business expenses you’d like to deduct, how formal you’d like your business structure to be, and how important limited liability protection is to you.
Articles of Incorporation Vs. Articles of Organization
Articles of incorporation are used to create corporations, while articles of organization are filed to form LLCs. Articles of incorporation may also be known as certificates of incorporation or corporate charters.
What to Prepare Before Filing
When it comes to preparing your articles of incorporation, each state’s requirements will vary. Generally speaking, you’ll need to provide:
- Your Company Name: Before filing your articles of incorporation, be sure the company name you want is not already taken. Most states require the addition of a corporate designation such as “Inc.” after your company name.
- A Business Address: This is your principal place of business and must be a street address. P.O. Boxes are not permitted.
The Company’s Purpose: Most states allow a broad description, such as “to engage in lawful activity,” but some states will require you to be more specific. Review your state requirements before completing this section.
- A Registered Agent: A registered agent is someone who has agreed to accept service of lawsuits and other official documents on behalf of the corporation. All states require registered business entities to select a registered agent. While a business owner may serve as their own registered agent, hiring a professional is highly recommended.
- Incorporators, Officers, Directors and Other Members: An incorporator is a person or company filing articles of incorporation with the state. Most states require the incorporator’s name, address, and signature to be included. Some states also require the names and addresses of directors and other members of the corporation.
- Number and Type of Shares: Your articles of organization should also include information regarding the number of shares your corporation is authorized to issue, classes of shares, and the value of each share.
- An Effective Start Date: Some states allow you to choose the date your company effectively starts doing business. Others states will assign this date when your articles of incorporation are processed. In either case, the date can never be in the past.
- Non-profit requirements: Non-profits are typically required to provide additional information to establish their eligibility for 501(c)(3) status.
Where Do I File?
When you’re ready to file, you’ll need to submit your articles of incorporation to your secretary of state or whatever state agency accepts business filings. Be sure to double-check exactly where you are supposed to send your paperwork. Sending it to the wrong office will delay the approval process.
Do I Need a Lawyer to File?
It is typically not necessary to hire a lawyer to assist with filing your articles of incorporation. If you do not feel comfortable filing completely on your own, you may seek assistance from services like IncFile, Legal Zoom, or Rocket Lawyer. You can find a list of the top 5 legal assistance websites here.
How Long Will it Take to Incorporate My Business?
Processing times for your articles of incorporation will vary by state. In Alaska and Hawaii turnaround can be as fast as 3 to 4 days, while Delaware can take 4 to 6 weeks.
Below is a current list of approximate wait times for each state. Many states also offer expedited processing for an additional fee.
- Alabama: 15 to 20 business days
- Alaska: 3 to 4 business days
- Arizona: 12 to 23 days, 4 to 9 days if expedited
- Arkansas: 3 to 5 business days
- California: ~4 weeks, ~2 weeks if expedited
- Colorado: 3 to 4 business days
- Connecticut: 15 to 20 business days, ~1 week if expedited
- Delaware: 4 to 6 weeks, ~1 week if expedited
- District of Columbia: 15 to 20 business days, ~5 business days if expedited
- Florida: 3 to 4 business days
- Georgia: 12 to 15 business days, ~3 to 5 business days if expedited
- Hawaii: 3 to 4 days
- Idaho: 5 to 7 business days
- Illinois: 20 to 25 business days, 3 business days if expedited
- Indiana: 3 to 4 business days
- Iowa: 15 to 20 business days
- Kansas: 3 to 4 business days
- Kentucky: 10 to 12 business days
- Louisiana: 5 to 7 business days
- Maine: 15 to 20 business days, 1 week if expedited
- Maryland: 10 business days, ~1 week if expedited
- Massachusetts: 5 to 7 days
- Michigan: 15 to 20 business days, ~4 business days if expedited
- Minnesota: ~5 business days
- Mississippi: 8 to 12 business days
- Missouri: 10 to 15 business days
- Montana: 15 to 20 business days, ~8 business days if expedited
- Nebraska: 15 to 20 business days
- Nevada: 3 to 5 business days
- New Hampshire: 15 to 20 business days
- New Jersey: ~2 business days
- New Mexico: 8 to 10 weeks, ~3 to 4 weeks if expedited
- New York: ~3 business days
- North Carolina: 20 to 25 business days, ~1 week if expedited
- North Dakota: 15 to 20 business days
- Ohio: 10 to 15 business days, ~1 week if expedited
- Oklahoma: 3 to 4 business days
- Oregon: 3 to 4 business days
- Pennsylvania: 5 to 7 business days
- Rhode Island: 3 to 4 business days
- South Carolina: 15 to 20 business days
- South Dakota: 15 to 20 business days
- Tennessee: 2 to 3 business days
- Texas: 3 to 4 business days
- Utah: 15 to 20 business days
- Vermont: 15 to 20 business days
- Virginia: 3 to 5 business days
- Washington: 7 to 10 business days
- West Virginia: 15 to 20 business days
- Wisconsin: 10 to 15 business days, ~3 business days if expedited
- Wyoming: 15 to 20 business days