If you’ve recently decided to form a corporation, then you may want to consider the pros of incorporating within the state of Delaware. Some things to think about include:

• Income Tax: unlike many other states, Delaware does not charge any income tax on corporations that don’t operate within the state.

• Incorporation Fees: Delaware has very low incorporation fees as compared to many other states.

• Shareholder Taxes: company shareholders who do not live in Delaware do not have to pay Delaware state income taxes.

• Favorable Court System: Delaware’s “Court of Chancery” exists solely to handle business cases. This court is very sophisticated and efficient, and often followed by other courts throughout the United States.

• Quick Processing Times: Incorporating a business within the state of Delaware is faster and simpler than in most other states.

There are also some negative aspects associated with incorporating a business in the state of Delaware. While these factors are often disregarded, it’s a good idea to weigh the pros and cons of incorporating in Delaware closely. Here are some reasons why incorporation within Delaware may not work for your business:

• Heavy Bank Tax: while the state of Delaware does not tax most businesses heavily, banks are the exception to this rule. Banks are often taxed more than any other business.

• Your State Taxes: the incorporation taxes in Delaware are rather low, but you may still have to qualify your business in your home state.

• Home State Tax: you will still have to pay any taxes that apply to corporations in your home state.

While large companies and companies who receive (or expect to receive) venture capital financing may greatly benefit from incorporating within the state of Delaware, smaller closely-held companies might not enjoy the same benefits. If you own a small business it may be worthwhile to consider other states for your incorporation.

When it comes to structuring a company as a sole proprietor, you are still liable for anything that happens with your company. For example, if you have taken out loans to start your company and are unable to pay them back, lenders can seize both your business and personal assets until the money that you owe has been collected.

Another drawback to a sole proprietorship is that you may not be able to gather as many of funds from lenders as you would with a corporation. As a sole proprietor, the amount of money that you can gain from a lender largely depends upon the type of personal collateral that you have. It also is difficult to find investors who will invest in unincorporated businesses.

There are also a couple of benefits to becoming a sole proprietor including numerous tax benefits. While other types of incorporations are taxed heavily, a sole proprietor is only taxed on the business profits. In addition, the costs associated with setting up a sole proprietorship are low when compared to other types of businesses. You can also take comfort in knowing that becoming the sole proprietor of a business means having absolute control over that business.

Since attempting to form a corporation can be tricky, it’s a good idea to speak with an online formation specialist. An online formation specialist can help guide you through the incorporation process, so that you can decide whether or not a sole proprietorship is the right option for you. After you’ve made a structuring decision, you can incorporate your business online simply and efficiently.

• Sole Proprietorship: this type of legal structure does not make any kind of legal separation between you (as a business owner) and your business. While the costs associated with arranging a sole proprietorship are low, you will be held personally responsible for any company liabilities, debts, or obligations. You could wind up losing all personal assets due to a lawsuit or bankruptcy.

• Limited Liability Partnership: each partner who is part of an LLP business has a separate legal responsibility. The advantages of this legal structure include limited liability and a one-time tax fee. The main disadvantage to this type of structuring is that all partners are still held personally liable for company liabilities, debts, or obligations.

• General Partnership: when many different people want to own a stake in an unincorporated company, this is called a “general partnership.” As with a sole proprietorship, a general partnership structure does not include any separation between the business and those individuals who own the business. The main thing to consider when thinking about a general partnership is the fact that all partners are responsible for the actions of other partners. Should your partner make a bad business decision, you are also legally responsible for that bad decision.

• C- Corporation: this type of structuring allows for a clear separation between the business and those who own the business. When a C-Corporation is formed, shareholders are not personally responsible for business transactions and company liabilities, debts, or obligations of the company. While a good option, a C-Corporation can be very expensive to maintain and might not be the most tax-efficient entity choice.

• S- Corporation: as with a C-Corporation, shareholders who have a stake in an S-Corporation are not personally liable for company liabilities, debts, or obligations. Those who are part of an S-Corporation are only taxed once, though various administrative costs apply to this type of structuring. S-Corporations are popular entity choices.

• Limited Liability Corporation (LLC): an LLC is often considered the best of both worlds, since owners of an LLC are only taxed once while not being held personally liable for any business obligations that may arise. The main disadvantage of an LLC is that this type of company is subject to high administrative, set-up, and general business costs. Certain types of owners don’t like to own an interest in LLC’s, such as a venture capital fund.

Spend time learning about which type of legal structure is right for your business. If you are unsure of the type of structuring that will work best for your company, speak with an attorney. Attorneys will be able to provide you with all the information that you need in order to properly structure your new venture.

When you decide to incorporate your businesses in the State of Georgia, you will need to designate a registered agent located within the state. A registered agent can be an individual or corporation with a physical address within the state, which is responsible for receiving your corporation’s legal documents. Registered agents can be lawyers, service companies, or increasingly, third party registered agent services (www.FilingsMadeEasy.com/registered-agent-service). Third party services can help your company complete the necessary articles of incorporation, which are detailed below.

Specific Requirements for incorporating a Business in Georgia:

Registering a Name: You must register a name for your business, which is not already in use by another company. This may be done by going to http://www.georgiacorporations.org and the fee is $25.

Initial Annual Registration: A corporation must submit an initial annual registration form within 90 days of incorporation and include the names of all principal officers.

Corporations need to include:

• - The name of the corporation;
• - The total number of shares the corporation is authorized to issue;
• - The registered agent’s name and street address in the State of Georgia, (P.O. Box not acceptable);
• - The names and addresses of the incorporator or incorporators; and
• - The initial address of the corporation, this may be a P.O. Box.

Publication: In addition, corporations formed in the State of Georgia are required to satisfy the state-imposed “publication” requirements.  Filings Made Easy can assist you in complying with this requirement.  www.FilingsMadeEasy.com.

When you plan for your business, have a second plan, which you will follow if the unexpected happens and “survival” suddenly becomes your short-term goal.  Being prepared for the unexpected could put you at a competitive advantage if others in your industry do not take the same preparatory steps.  Furthermore, developing a plan when not in the middle of a catastrophe often will be more clear and better develped, than one created when in the middle of a crisis.

How many predicted the economic troubles we have faced since 2008?  Not many, but many were prepared for the unexpected and quickly took steps to ensure the survivability of their businesses, and these businesses then had opportunities in the recovery that competitors may not have had.

You may wish to start this process by incorporating your business or forming an LLC, obtaining a federal tax identification number (FEIN), and then applying for a D-U-N-S number from D&B.  Once you start to establish your corporate credit, like your personal credit score, it is important to monitor and maintain your company’s credit score.

When we work with a client, we understand that the smallest mistake can lead to dire consequences to our clients.  In 2009, a major US company was slapped with a default judgment for over $1 billion (yes, billion) because it did not show up to court in a lawsuit in which it was named as a defendant. 

Why did it not show up to defend itself?  Easy answer — it did not know it was being sued because its registered agent failed to provide the legal documents about the lawsuit. 

These are the things we ensure do not happen with our clients.  Small mistakes result in BIG consequences, and we take our duties very seriously.

We know the importance of the services we provide — we sweat the small stuff and ensure that we do all that is possible to protect your business when  it comes to registered agent services.  We charge $125 per year — orders can be placed at www.FilingsMadeEasy.com/registered-agent-service or 888-237-3410.  Also, do not hesitate to contact us with any questions.

-         no corporate income tax

-         no taxes on stock

-         no franchise tax

-         no state personal income tax

-         minimal corporate annual fees

-         no inheritance or gift tax

-         Nevada’s business court, which is modeled on the Delaware Chancery Court.  This allows for:

• Prompt resolution of business disputes
• Priority for hearings of business disputes
• Sophisticated business judges