Danielle Dory

Archive for August, 2012|Monthly archive page

Thinking About Incorporating?

In Blog, Business on August 15, 2012 at 1:28 pm

To say that I’ve been busy these past few weeks would be an understatement.  Part of my time was spent registering for classes on Coursera (a site I highly recommend for anyone dealing with classroom learning withdrawals).  The rest of my free time was spent attempting to decipher cryptic tax laws.  I wish I could claim an exotic trip, or losing myself in crowded city streets but admittedly I’ve been hunched over my computer and books.  

Yet a few weeks later, here I stand-  bags under my eyes and a little bit more knowledgeable about the beginning steps of owning your own business.   Over the past few weeks I have been trying to figure out how to register with the state as a LLC.  To be honest, a few weeks ago I had no idea what the difference between an LLC, LLCs, LLCc, Inc, or Co’s was- last week  my brain was still swimming in an alphabet soup.  Today, I’m finally ready to share what I’ve learned …

Just as a reminder, I am not a tax expert.  I’m just someone who spent a lot of time on the internet.  If you are thinking about incorporating, talk to an accountant and business owners who have incorporated.

  1. Why Would You Want to Become “Incorporated”?

For small businesses with plans on making it big one day, incorporation helps to protect your personal assets from lawsuits. 

If you’re being brought in as a consultant, filing as a single member LLC will protect your personal assets from lawsuits, but it will also allow you to separate your business expenses from your personal income.  This is particularly important from a tax perspective.

    2.  How do I become “Incorporated”?

The process varies by state, so if you want to register on your own you’re going to have to do a bit of research. If you don’t want to do that, a great website to register your company with Legal Zoom. If you’re like me and you don’t want to pay any extra processing fees, I suggest registering with your state’s Department of Treasury.  You will need to:

1. Pick a name

2. Write a statement of purpose

3. Understand what type of business you want to register as- if you are the only person involved in the business MAKE SURE you register as a single-member LLC. That will unable you and your business will be taxed once as one entity.   If you have a partner- set it up as a partnership… make sure you know exactly what you are before you register.

4. Create an EIN with the IRS

  3.  Handling Your Funds

 If you’re incorporated, you will be filing and reporting your own taxes- social security taxes, income taxes, the whole 9 yards. This site, will help you to calculate your estimated daily, monthly, quarterly and yearly taxes. From there you will need to keep detailed record of all your business expenses- gas, milage, car payments, health care ect.  This will help you determine the difference between your business expenses and your personal income. 

A helpful way to keep track of your business expenses is opening up a business account.  Shop around a bit in order to get a policy that works for you, but essentially you will want to use this business account to collect your income and track your business expenditures- for taxing purposes. 

 

Okay folks, that’s what I’ve learned. 

 

If you know any additonal infromation, feel free to email me or leave a comment.  I’ll be sure to update this post with any additional information I come across in the next few weeks.