This is the second episode of the “Non-Technical Startup Founder Podcast.” I’m continuing with the topic of incorporations because I wanted to give specific steps that anyone could follow to self-incorporate their business without having to pay insanely overpriced fees to legalzoom.com or incorporate.com.
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I’m hoping that this podcast will be helpful to startups with technical founders or co-founders that lack the business experience or background. This could be the imaginary “business guy or founder” that your startup may be lacking. Also, this podcast will be document my personal experience into starting and running my own startup from the ground up.
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Incorporation Process
C Corporations and S Corporations (Same Filing Process)
- Articles of Incorporation
- Corporate By-Laws
- Appoint Board of Directors
- Create shareholder agreement
- Form 2553 (S Corporation IRS Election)
Note: Name must have Inc, Company, Co, Corp., Corporation and etc.
Limited Liability Companies and Limited Liability Partnerships
- Partnership Agreement
- Operating Agreement
- LLC Membership Certificate
Note: Name must have Ltd., LLC, LLP, and etc.
All Incorporations require a registered agent for the state to correspond with in regards to the company.
Common pitfalls:
- Section 83(b) tax election with the IRS.
- Section 351 capitalization rules (how to fund a new corporation without paying additional taxes)
- Issued shares or stock does not correspond to the Articles of Incorporation.
- Improper allocation of profits and losses from LLCs and LLPs.
- Fees paid to incorporate or organize are tax deductible.
- Startup costs are also deductible. (Ex: research expenses and etc.)
Hi Cameron,
I viewed your interview on Mixergy and wanted to make sure I heard you clear. If you don’t forcast your business making over 50k and not having a lot of risks, you should go with a DBA, correct? I am a graphic designer, building websites for small businesses, and I will also be selling promotions Faith Based products (Tshirts, bags, etc…) Why not an S corp?
Hey Doc, yup I’d suggest you avoid incorporating. The reason is because incorporating is going to cause you to spend a bunch of money for the filing fees, annual tax fees to your accountant and etc. Plus, if you happen to forget to file your tax return for an S Corp then you’ll have a $200 dollar penalty per month per shareholder.
Basically, it comes down to not being worth it because its just easier, faster and cheaper to use a DBA if your making less than 50k. Honestly, I wouldnt consider it unless you made more than 100k.
Cameron, I know you’re a busy man. And I just wanted to thank you for taking the time to reply. Thanks for inspiration and sharing information.
Doc
… thanks for “your” inspiration and…