Three Important Decisions You Must Make Before You Incorporate or Form an LLC

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If you’re looking to start a business or have been operating as a sole proprietor, you’ve probably been considering if incorporation or forming a limited liability company is the right move for your business. There are many advantages to incorporating such as asset protection, tax savings, and limiting your personal liability.

Before you rush off to form a corporation or LLC, you need to make some important decisions for the future of your business.

Make sure that you have made these three important decisions before you incorporate or form an LLC:

Where to Incorporate or Form an LLC

The first big decision you’ll need to make before forming your business entity is what state you should incorporate or form the LLC in. You may choose to go with the state in which you live in or you may foreign file in a state that offers other advantages. States such as Delaware and Nevada are known for their business friendly laws and are popular among business owners operating in other states.

The cost of forming your entity and corporate laws vary from state to state, so do your research on which state has to offer before you commit to one. Some business owners mistakenly think they will save money by incorporating in a state with low fees, even if their company is neither located nor conducts business in that state. These business owners often don’t realize that they will have to pay more to foreign file in the state in order to transact business in their home state.

The Name of Your Business

Do you have a name picked out for your business? If you do have a name, make sure it’s available in the state in which you plan to form your entity. The name you choose for your business must be different than the name of any other business entity registered to do business in your state of incorporation. If you’re not sure if the name is available, many states have an online search tool that allows you to check for similar business names in that state. You may also want to create a list of backup names in case your name is already in use.

In addition to making sure your name is not currently in use, you’ll also want to make sure that you avoid using restricted words in your name. Words such as “bank” and “insurance” or “architect” may be restricted for use in some states. Check for a restricted words list from the state in which you plan to form your business entity.

Business Location

The final decision you’ll need to make before you incorporate or form a limited liability company is where your business will be located and what the official business address will be. You’ll need a specific address to put on your articles of incorporation (or articles of organization if you’re forming an LLC) so that the business can receive legal documents, and official state documents.

In most states, your business location can serve as the registered office, and a corporation or anyone aged 18 or over can be the registered agent. However, if you don’t have an office in the state where you incorporate, or if you prefer to have someone else act as agent for you, you can hire a professional registered agent that will receive documents on the behalf of your business.

After you’ve made these three important decisions for your business, you’ll be ready to incorporate or form your LLC.