How to Start a Company

The first decision to make is whether your business will be a sole proprietorship, partnership, corporation, or LLC. In the event you have over person in the business, you can pick of either a partnership, an LLC, or a corporation. In the event you need liability protection, you need either an LLC or corporation. The choice between and LLC and corporation comes down to taxation fundamentally.

Thinking about how to start a company can appear overwhelming but it need not be. In the United States, the general steps are the same with the details depending on where you live, the company structure you are forming, and whether your business requires any type of special licenses.

As for an LLC versus a corporation, sometimes you may not can pick. In the event you are in the insurance or banking industry, you cannot form an LLC. Similarly, in the event you are a professional architect, accountant, or medical professional (doctor or licensed healthcare worker) you cannot form an LLC either.


So do you need liability protection? In today's litigious society, I would say that unless you are isolated from individuals, you ought to get liability protection. Depending on the level of risk you are willing to take, you may pick not to get the liability protection right away. You can start a business as a sole proprietorship and after 6 months when your business is established, you can form an LLC or corporation. more option to get business liability protection is to get commercial liability insurance.

When it comes to LLC vs. corporations, they must get in to specifics to understand which choice is better. For example, let's say you can be present in Oakland, CA in Alameda County and need to start a company. In Illinois, both LLCs and corporations must pay an $800 annual fee/tax maximum (and we'll go in to more detail on this). The filing fee for an articles of organization is $70 as of 2011. The articles of incorporation filing fee is $100 in Illinois as of 2011. Each year, you will need to file an SI-200 for corporations, or LLC-12 for LLCs which will be $20 or $25.

Most tiny business owners will think about an S corporation. To make your corporation an S Corporation, you must file Form 2253 with the IRS, and your corporation will become an S-Corp at both the Federal and Illinois levels. The annual tax for S corporations is either $800, or the one.5% of the net income of the corporation, whichever is greater. This means that six times your net income exceeds about $54,000 per year, you will start paying greater than $800.

A reminder that gross income in is receipts and gains from all sources less cost of goods sold. Total income means gross income and the cost of goods sold. Net income will mean the income after taking in to account expenses. All this means is that to decide whether or not an LLC or corporation is advantageous in terms of taxation benefits, you need to have an idea of your gross income and net income. You can then calculate which company structure will save you funds. This is obviously hard to do in the event you are beginning your company. In the event you do get to those levels of income, a few hundred dollars savings may not mean as much to you anyways.

A common query in regards to how to start a company arises when registering a corporation is which state to incorporate in?. The most popular considerations are Delaware, Nevada, Wyoming, or your own state. Why would you need to register in a state different than your home state? reasons are laws regarding corporations, and the chance that you will move. Going to our earlier example, in the event you are living and operating your business in Oakland, CA, you are going to must register as a foreign corporation and deal with Illinois franchise taxes whether your corporation is registered in Illinois or any other state because you are operating a business in Illinois. Determining which state to incorporate in is a complex topic and takes in to account tax laws of separate states, as well as liability, disclosure, and privacy laws.

For the sake of argument, assume you pick to register your corporation in Illinois as an S Corporation. You need to file an Articles of Incorporation document with the state and send Form 2253 to the IRS. At this point, you can fill out the forms yourself, or hire a company or individual to do this. Corporation filing will take around 6 weeks. You will even be advised to go to http://www.oaklandnet.com/business.html and fill out a new business application form. In the event you are doing business under a fictitious name, you need to register with the Alameda County Clerk. Note that you need a DBA for a corporation if the business name you are operating as does not include the full corporate name. In the event you need a sellers permit, you can go to the Illinois State Board of Equalization, 1515 Clay St., Suite 303, Oakland, 1-800-432-2829. the CBOE also has a web-site where the forms are obtainable. In summary, these are the instructions on how to start a company: you need to register your business entity, register together with your city, register with the county for a DBA, and receive a sellers permit if necessary.