“Where do I incorporate?” is a question that our incorporation specialists answer on a daily basis – and it’s a very good question to ask.

The fastest answer is “it depends.” When you’re deciding to incorporate your business, there are many things for you to consider. We’ve compiled these 3 important questions for you to ask yourself when deciding what state is best for incorporating your business.

• Where will you be conducting business?

We recommend incorporating your business in the state where you will be handling the majority of your business transactions. For example, if you live in Connecticut and will be conducting your business primarily in Connecticut, we would suggest Connecticut as your state of incorporation. Keep in mind that this is not a requirement, but is highly recommended to avoid any possible complications.

• Where do you plan on opening your business bank account?

Some banks may require that your business be incorporated or qualified (defined here)  in that bank’s state. So, if you’ve incorporated your business in Texas, but you try to open the bank account in Oklahoma, your bank may deny your request to open a business bank account. This is not always the case. It is best to review this with your bank of choice prior to incorporation. Try asking them if they require you to be incorporated or formed in that state in order to open a bank account.

• Are you familiar with the desired state of incorporation’s annual compliance requirements?

Nearly every state requires corporation and LLCs to pay a variation of an annual fee in order to keep your company in good standing. The name of this fee varies by state, but may be referred to as “Annual Report,” “Franchise Tax,” or “Annual Registration.” The following components of the annual compliance may vary as follows:

Price. Some states have annual fees as low as $9, while others can reach upwards of $500.

Due Date. Certain states only require you to file once every 2 years, while others require a yearly filing. You’ll find that the actual due date can vary from a specific date or month, to simply the anniversary of the company’s incorporation.

Filing Options. Many states are offering online filing options, but some states still require reports to be sent in through mail.

Our State Specific Information section is a great resource to find thorough information regarding incorporation requirements and annual report information. If you do your research and ask the necessary questions, you’ll successfully incorporate your business in your state of choice. These inspirational articles are great examples of entrepreneurial success across the nation:

John Pepper’s Boston Burrito Empire

Chicago Cupcake Makeover Success

Don’t hesitate to ask any questions or share your incorporation success story!

Last week, we did a brief overview of the characteristics of a Limited Liability Company. This week, we’ll outline some of the key characteristics of “Corporations” – another type of entity that may be best for your business.

A Corporation can be defined as an artificial entity created under and governed by the laws of the state of incorporation. Similar to an LLC, you must file the appropriate documents with the state in order to have your Corporation legally recognized.

If the following traits sound pertinent to your business, you may want to consider forming a Corporation as opposed to an LLC…

1. Corporations issue stock. Stock can be used to raise capital (operating funds) to run or expand your business.
2. Corporations are owned via shares of stock.
3. When maintaining a Corporation, you’re required to hold an annual meeting of shareholders and directors. During these meetings, you must keep written minutes, or notes.
4. The profits of the General Corporation (which are distributed to the shareholders of the corporation as a dividend) are taxed at the corporate rate. The dividend is subject to personal income taxes.

These characteristics describe the general functionality of a Corporation, but it is best to fully research and understand your options before deciding which entity type is best for your business. While Corporations are one of the more common business entity types, there are a few other types that you may want to consider.

Along with our Answer Desk, there are many great resources for you to utilize while researching your development options. Entrepreneur Magazine provides a great overview of business structures and is a consistent resource for industry updates.

After you’ve reviewed your options, you may be ready to form your corporation online. If you’d like to receive information on doing so, or if you’re ready to incorporate, visit our Quick Quote section to get started!

What resources have you found helpful when developing your business or corporation? 

Over the next week, we'll focus on helping you understand the basics of company formation. Before you start your business, it's best to have the business become legally recognized by the state through incorporation or formation. Today, we'll do a quick overview of 5 important things to consider during LLC creation. 

An "LLC" or "Limited Liability Company" is a legal entity created by filing the appropriate certificate with your selected state of formation. This entity has "Limited Liability," which helps to separate your personal assets from your business liabilities. 

Here are 5 Important Things to Consider During LLC Creation: 

1. LLCs do not issue stock. Stocks are specific to Corporations - a different type of business entity that offers different benefits.
2. An LLC is a "pass through" tax entity. It is taxed like an "S" Corporation, where the profit or loss generated by the business is reported on the personal income tax return of the owners.
3. LLCs are typically owned and managed by the members of the LLC. On a related note, LLCs have members and managers, not officers or directors. Officers and directors are specific to Corporations.
4. LLCs are not required to create or maintain by-laws, but instead use an Operating Agreement. Operating agreements are set up internally within your company, and structure how you handle your business.
5. LLcs are not required to hold annual meetings. This provides more flexibility and offers a benefit if your members are located in varying distances.

Keep in mind that these are brief points and that there is much more involved when creating an LLC. You can learn more in our Learning Center.

Corporations are another type of business entity that may work best for you. If you'd like a quick overview of the differences between Corporations and LLCs, you can download our free Fact Sheet.

These articles from Inc.com also share some great points about what to consider when creating an LLC:

• More tips on determining if an LLC is best for your business 

• Tips for setting up an LLC Operating Agreement

What have you found helpful when setting up or managing your own LLC?