Filing Form SS-4 by mail is similar to filing by fax, in that you will fill out, sign, and send the completed form to the IRS. This option, however, takes a much longer time, typically up to four to five weeks to receive the EIN. An operating agreement is not required in most states, but it’s a good practice to have one. The most common name for this document is “Articles of Organization.” It is also known as a Certificate of Formation or Certificate of Organization. Your LLC formation document outlines the organizational structure of your business. LegalZoom provides access to independent attorneys and self-service tools.
She has written hundreds of articles on legal, intellectual property and tax issues affecting small businesses. While you don’t exactly need a business plan to start a business, it’s a good idea to create one.
Going through corporate laws and legal peculiarities for filing documents, various requirements for different business entities, and terms and dates for filing annual reports and taxes. It’s all a huge burden and a process bound for mistakes that many founders would rather like to avoid. With an 8.7% corporate income tax, a personal income tax that ranges from 2.2% to 6.6%, and an additional gross receipt tax of up to 1.9914%, Delaware is not the best location to start your small business. On top of that, it has an enormous franchise tax, which is $300 for LLCs and $400 per million of gross value for corporations. C-corporations are attractive to investors since the shareholders of a C-corporation only pay taxes when they receive dividends from the company. Unlike an LLC and other types of entities where the members share (based on their ownership percentage) the company’s profits and tax burdens regardless if they receive any distributions. Creating an LLC or corporation protects you from that, as the company is legally regarded as its own separate entity.
Read more about USA company formation here. Knowing how to form a corporation will get your new business venture off to a good start. Jane Haskins practiced law for 20 years, representing small businesses in startup, dissolution, business transactions and litigation.
Cheapest Way To Start an LLC
The taxes are levied on the LLC, based on the state where you operate your business. LLCs can choose their desirable tax structure at the time of business registration. It is designed to avoid the double taxation issues of C corporations. Taxes can be passed directly through the owners’ personal income, avoiding corporate tax rates.
Many states allow you to do that for a small fee and short time period. The benefits of creating an LLC—as opposed to operating as a sole proprietorship or general partnership, or forming a corporation—typically outweigh any perceived disadvantages. Each state is allowed to develop its own laws, registration fees, renewal rules, and processing times. While in theory you have 50 states to choose from, some states have developed rules that make them more friendly to the establishment of a company outside the U.S.
Stripe-Atlas is an increasingly popular option that, for a low fee, helps you incorporate your company, set up a bank account, issue founders shares, and sets you up to receive credit card payments online. Furthermore, as a separate legal entity, the corporation is liable for its own debts and can only be held liable to the extent of the corporation’s assets. Even though shareholders can profit from the corporation through dividends and stock appreciation, they can’t be held personally liable for the business’s debts. While there are plenty of benefits that come with registering your business, it’s important to keep in mind the amount of administrative work that comes with being an incorporated entity.