If you are thinking of starting a business then you need to be sure to incorporate first, which allows you to open a business bank account and legally conduct business. These days it can be done online, making it convenient and almost instant.
Once you are incorporated the world is yours and you can get down to business. There are several reasons why you need to incorporate, even if you are a sole proprietor. There are several tax and liability factors of operating under a corporation.
Whether you are forming a company in the U.S. or interested in company formation in Hungary, there are several business entities to consider. Here are the three most common.
This is what you would go with if you have multiple partners, stock holders and plan to take on investors. The C-Corporation pays taxes and the profits are then distributed to the owners, who then pay personal income taxes on those payments. This is for the most complex business structures.
This is usually the option that a partnership will go with if they are not selling stock or taking on investors, as the company itself doesn’t pay taxes. The income is passed to the owners who then pay personal income tax. There are limitations in terms of who can own stock in the company, so always seek professional guidance when selecting the correct entity.
LLC (Limited Liability Company)
The LLC is the most common, as it doesn’t pay corporate taxes and limits personal liability for its members. You also don’t have to record meetings, offering the most flexibility of any company type. Most small businesses and sole proprietors opt for a Limited Liability Company.
Why an Online Service?
Once you seek out advice from an accountant and or attorney, you can use an online service to register your company. These services will charge you the applicable state and federal fees, along with their processing fee, but it’s often worth the additional cost to have it processed right away and handled correctly.
These third-party services usually offer specific guarantees in terms of delivery time (some process the same day) as well as it being done correctly. If you need it done fast there are also rush add-ons and often the peace of mind knowing a professional handled it is worth it.
There are many popular options to go with, and if you search online you can sometimes find special offers or even discount codes that reduce the additional service fee. There is no stopping you from filing paperwork yourself, but you must make sure you fully understand the process to make sure you don’t make any mistakes that could cause potential problems down the road.