Most businesses that incorporate do so to isolate the owner's assets from the business's debts and liabilities. Here's what you need to know to incorporate your business.
Step 1: Choose a corporation type Decide what type of corporation you wish to set up -- a C corporation, an S corporation, or a limited liability company.
TIP: In C Corporations, shareholders and the corporation both pay taxes; in S Corporations, only the corporation pays taxes. Limited Liability Companies are structured like sole proprietorships, but have limited liability protection.
Step 2: Decide where you want to incorporate Decide where you want to incorporate. You are free to incorporate in any state, but if you incorporate in one state and do business in another, you will have to pay a separate fee to do business in the state where you are not incorporated.
Step 3: Register Register your corporation and file the required documents with the state where you decide to incorporate. Contact information for all 50 states can be found at business.gov/register/incorporation/.
Step 4: File new documents File new documents with the state if you decide to change your business structure. Federal guidelines for changing a business structure can be found at irs.gov.
Step 5: Follow state and federal laws Follow state and federal laws when paying yourself a salary and bonuses as an employee of the corporation.
FACT: President Abraham Lincoln created the Commission of Internal Revenue in 1862.