Incorporating: Frequently Asked Questions
Incorporating is a significant step for a growing business. These answers cover the questions we hear most often.
What does it mean to incorporate?
You file formation documents, usually called articles of incorporation, with the state, creating a corporation that is legally separate from its owners. The corporation can own property, enter contracts, sue and be sued in its own name.
How do I incorporate in Georgia?
You generally file articles of incorporation with the Georgia Secretary of State, appoint a registered agent, and pay a filing fee. Afterwards you adopt bylaws, issue stock, and hold an organizational meeting. You will also need an employer identification number and may need local licenses and state tax registrations. Our formation services can coordinate these steps.
Does incorporating protect my personal assets?
In most cases it limits your personal exposure to the corporation's debts and liabilities. It does not protect you from personal guarantees, your own wrongdoing, or certain unpaid payroll taxes. To keep the protection, keep business and personal money separate and follow corporate formalities.
What is the difference between a C corporation and an S corporation?
Both are corporations under state law. The difference is tax treatment. A C corporation pays its own tax, and dividends are taxed again to shareholders. An S corporation, which requires a timely election with the IRS and meeting eligibility rules, generally passes income through to shareholders. Which is better depends on your profits and plans.
Do I have to pay myself a salary?
If you work in the corporation, you are generally an employee and must be paid reasonable compensation, with payroll taxes withheld. This is especially scrutinized in S corporations. See our payroll services.
What ongoing requirements will I have?
- Annual state registration and fees
- Corporate minutes and records of major decisions
- A separate corporate tax return
- Proper bookkeeping and payroll filings
Is incorporating right for everyone?
No. A small, low-risk business may do fine with a sole proprietorship or LLC. The added costs and formalities should be weighed against the benefits.
If you are deciding whether to incorporate, contact our office and we can help you weigh it.
This article is general information, not tax, legal or investment advice for your specific situation.