If you’ve created a successful startup business, you may be considering making it official by filing for a corporation license. While you may believe this is the next step, there are some things you should know about becoming a corporation so you can decide whether or not that is the right entity route for you. Here are 4 things every startup should know about going corporate.
The Tax Structure Is Different
One of the biggest differences between having a sole proprietorship when you start out and changing that to a corporation is your tax structure. When you venture into corporate status, you’ll need to file taxes for your business as well as yourself. The corporate taxes can be more difficult to fill out and you may need the help of a skilled accountant to do so.
It Limits Your Personal Liability
As your business continues to grow, you’ll likely be taking on more risks through contracts and a larger customer base. Going to a corporate status allows you to remove your personal liability from the business. Once incorporated, the owners of the business are seen as completely separate from the business itself. This means people can sue your business for wrongdoing, but they can’t hold you liable. You should talk with an experienced attorney to understand how your liability is changed when you incorporate your startup.
Decide on Your Address
You must decide on a business address for your company. As with most startups, it’s likely that you don’t have a formal business location yet. You’ll need an address to qualify for your operating license in your state. A great solution is to opt for a P.O. box if you don’t have a location yet.
Name Restrictions
Every state has its own rules regarding the fictitious name that you use for your business. As a general rule of thumb, you can’t have the same business name as any other business already operating in your state. You can typically go to your state website and utilize their online search tool to see if any other business is currently registered with the name you want. You’ll need to decide on what way you want to signal incorporation with your business name. The most popular options include adding ‘Inc.’ or ‘Corporation’ to the end of your business name. You can also discuss branding issues and business names with a marketing agency, who can help you understand the process.
Getting your business off the ground takes a lot of commitment and courage. One of the most common steps that most startups will go through is filing for legal corporate status. You should be aware of the four factors above before you decide to file for your corporate entity license.
Brooke Chaplan is a freelance writer and blogger. She lives and works out of her home in Los Lunas, New Mexico. She loves the outdoors and spends most of her time hiking, biking, and gardening. For more information, contact Brooke via Facebook at facebook.com/brooke.chaplan or Twitter @BrookeChaplan