How to Incorporate (in Seven Steps) and Establish a Niche Business
One of the most important steps to mindset adjustment for financial independence is to establish a business and then the decision surrounding your business becoming incorporated.
Note, there is absolutely nothing wrong with managing your business as a sole proprietor or commingled with your personal assets.
However, if you truly want to create a mental space in your mind that literally and figuratively separates you as a person from your business activity, you / your business may need to be incorporated.
What does incorporate mean, What is an incorporated business, What is a limited liability company
Now, most information that you will find on the web concerning incorporating describes a scenario where you have numerous assets and employees and makes things seem way bigger and scarier than they need to be. If you are in that position, established business with employees, that’s fine but this write-up is really focused on those who are just starting out on their own with limited or no assets save for start-up financing.
So, in a nutshell, having an incorporated business means that the business is a separate legal entity recognized by the State and Federal government and authorized to operate as an entity (for profit or nonprofit). If you are still reading then you are probably questioning the need to be incorporated. I invite you to take a read of a really nice write-up at Entrepreneur.com. If you are more pictorially oriented, there is a more descriptive write-up at Wikihow. If you still have doubts order and take a read of the Robert Kiyosaki approved book by Garrett Sutton Start Your Own Corporation: Why the Rich Own Their Own Companies and Everyone Else Works for Them. (Note this is an Amazon affiliate link to Garrett’s book.)
Seven Steps to Incorporate your Business
If you’ve read thru the information at one or both sites and now understand the why you are either completely motivated or at least still intrigued enough to investigate further. Here are some items for consideration:
1) You will need funds to incorporate (~$300 – $1000). Note without providing tax advice, this would seem to be a business expense or a business loan (from you to your corporation).
2) You will need to come up with a business name and register it with the state (take a read of my overall approach for naming and incorporating my company on my blog post)
3) You will need to determine how you will incorporate
a) One, you can do so directly thru the State (there are instructions on each State’s minimal requirements for documentation see this link);
b) or two, you can use an incorporation service and literally select from a menu of options those that you’d like to include in your incorporation process (this is what I did and briefly described in my post). If you have any doubts about managing the process on your own and do wish to incorporate I would recommend this approach.
Included in the incorporation service option for incorporating is a choice for the service acting as your Registered Agent. At this point, many states require that you use a Registered Agent so this applies to either the manual or menu (a-la-carte) approach to incorporating. The Registered Agent collects tax, official state, and other legal correspondences on behalf of the corporation. A more detailed description of the Registered Agent’s function is described at LegalZoom.com. You can sign up for Registered Agent services separately thru Northwest Registered Agent. Or alternatively, utilize Registered Agent services thru Incfile at the point of incorporation.
(note I have affiliate relationships with Incfile and Northwest Registered Agent and receive a small amount of compensation, at no additional cost to you, when you sign-up for their service thru the links)
4) You will need to make a determination of the level of privacy/separation that you want from your corporation. That is, you can choose (with great caution) to colocate your corporation with your personal address. However, this is not advisable as this could amongst other things risks ‘piercing the corporate veil’. Thus you will need a separate address for your business. And you cannot, at least thru the service I used, use a PO Box as your separate business address. I ended up using UPS’s in-house mailbox service but there are likely other companies that will provide mail services for a nominal rate.
5) File on your own or file thru the incorporation service for a Tax Identification Number
6) Utilize Legal Services (this is optional and I will not offer an opinion on which approach is best)
7) And finally, create your LLC Operating Agreement
Overall the process took me about 3 – 4 weeks to complete.
Again the company I use and recommend for Incorporating and joint Registered Agent services is IncFile. The company I recommend for stand-alone Registered Agent service is Northwest Registered Agent.
Assuming you’ve taken the plunge and incorporated:
Congratulations! You have incorporated and have a legally established separate business entity!
What are the next steps after your business is incorporated?
You will need to go about setting your business up for monetization opportunities (assuming you are starting from scratch as I did).
You will need to make a selection of a bank as most business relationships you are likely to enter will require your business banking account information for payment of services or products. Some will accept Paypal but a number need a bank account.
I have a couple of suggestions for business banking services and use (one of them) primarily for the reason that they do not cost any money and have low or no minimum cash holding requirements.
The first is Spark Business Checking thru Capital One which I use.
The second, which I would consider is BOFI.com (Bank of the Internet).
Having said that do not let this step trip you up as there are ‘numerous’ and I mean ‘NUMEROUS’ options for business banking so use your best judgment.
Once your bank account is in place; you are ready to pursue monetization opportunities through whatever means you deem appropriate.
I’ll note two (link thru below) for those who do not yet have a blog or audience and thus have no ready means of generating income thru those avenues. Even if you do have established income streams take a look for consideration of additional streams.