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Types Of Corporations And How To Incorporate Your Startup Business

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Perhaps you have finalized to start a business. In such a case, you will have to take several crucial decisions. The first will be to select the type of Business Entity that fits perfectly your startup. Business incorporation can be done in different ways. Each one comes with its own pros and cons. Hence, you will need to research and gain basic information on the same before making the final decision.

Related Post: The Ultimate Investors Guide To Public Benefit Corporations And B Corps

Types of startup business

1. LLC (Limited Liability Company):

Less investment is required for its establishment. Financial results are recorded in personal tax filing. Owners not liable personally for company’s legal obligations or debts. But, if any member is lost, then it could dissolve. Attracting potential investors can be tough. Self-employment taxes need to be paid.

2. Sole proprietorship:

It is a simple, but highly effective for those eager to start a small business and not able to obtain VC funding. A single person \owns and operates this unincorporated business. No application or registration process desired. However, to obtain DBA certificate, a small fee is to be paid. With DBA document, you reserve the rights to obtaining a specific company name. But it has its downsides also. Several commercial banks might not allow opening of accounts. If there is more than one, then there can arise issues like who is the owner of the intellectual property.

Sole proprietorship Startup Business

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3. C-corps (C Corporations):

Startups mostly incorporate as C-Corp. Google, Apple and almost every large company across the U.S. had followed the same structure. This separate legal entity is held responsible to issue annual reports and pay corporate taxes. Board of directors should also be appointed. Being a complex structure, a startup of this type will not be a great idea. But if the plan is to raise venture capital, then C-Corp is perhaps the right choice.

4. S Corps (S Corporations):

These are small businesses that offer incorporation benefits combined with tax exempt privileges derived of that of a partnership. Income can be passed on directly to the shareholders like an LLC without having to pay federal corporate taxes. However, there exist some limitations. It is open to shareholders only who are residents or citizens of the country, certain tax exempt organizations, specific estates or trusts. This Business Entity allows issuing just a single class of stock and limited to just 100 shareholders.

Startup incorporation tips

If you wish to incorporate a business, then it will be a wise choice to do so in the place where you desire to start. Otherwise the best suggestion will be to incorporate the same in your region. Find out places where startups can easily secure outside venture capital. The region should have favorable corporate climate allowing you to incorporate effortlessly your business and grow it.

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Online incorporation

These days advanced technology and high speed net has helped many people to become small entrepreneurs with less effort. There are available a whole lot of self-help options falling into diverse categories. You need to consult a legal expert who can provide you with the right direction. This becomes all the more important if you want to start a business in a state with complex laws. You cannot afford to make mistakes that might only prove to be costly later on. You may even be required to face unwanted legal hassles. To avoid this, seeking expert guidance is mandatory. But this might not be necessary if you plan to start Sole proprietorship.

Selecting the best online/offline legal service

Whatever be the type of startup business you plan to start, you can seek online or offline guidance from the legal experts. They will hear your plans and the type of business you wish to start. Accordingly, they will guide you to establish a business that will grow manifolds.

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