Ever since the covid19 pandemic enlightened us on how convenient and efficient it is to run a business online, remote work has become the order of the day. Consumers are shopping and taking classes over their digital devices, existing companies are moving online, and new ones are starting up.
As a startup, whether selling products or offering services (such as commercial cleaning), one way to protect yourself and your business are by incorporating it.
What does it mean to incorporate your business?
Incorporating a business means formally registering it as a company legally recognized by your state.
When you start a small business, you can choose to be a sole proprietor or partner with others. You’d even have a business name.
But the truth is, your business isn’t legally recognized by the state. When you run into business debts, you are personally liable, and your assets — such as your bank account or home — can go in for it. Also, anyone can take your business name and use it, and you can’t sue them in court.
You can either incorporate your business as a limited liability company (LLC) or a Corporation (Corp).
Reasons to incorporate your online business
- Protect your business. When you incorporate your business, it becomes a legally recognized entity. Your business name becomes your exclusive property, and you can sue anyone that infringes.
- You secure your personal assets. Incorporating a business means separating it from the business owner. That is, the company now acts independently. Your personal guarantee or SSN will not be required when seeking business credit, and neither will your assets go in for it when your business is unable to pay back.
- You protect yourself. When your business is sued, it will be The State VS BusinessName rather than The State VS John Smith.
- You get tax advantages. You choose when and how you receive income from the business, which is a tax advantage. You can decide to take profit at a time when you’ll pay less tax. You don’t get such benefits with sole proprietorship and partnership businesses.
- Incorporating a business fosters credibility. This is something every home-based online business needs to thrive.
- Grow your business indefinitely. Even when the owner dies or sells interest, an incorporated business lives on and continues to grow.
Steps to incorporate your online business
- File your business name
The first step to incorporating your online business is to ensure the name you’ve chosen is available, i.e., it hasn’t been registered by another company in your state.
- Create your corporate bylaws
Corporate bylaws are the governing documents by which your business will operate internally in terms of handling disputes, profits, etc. This is essential if you have partners or a team.
- Form your LLC or Corp with the state
This is the most intensive part of incorporating your business. You’d fill documents called articles of organization (if it’s an LLC) either online or with the secretary of state. There are many details about your business that you must include, one of which is your business address.
Since your online business doesn’t have an actual physical location, you must use a virtual office address when incorporating your online business. A virtual office address gives you all the services of a real office, such as business mail, phone answering services, etc., without requiring a physical space. Most states do not allow PO Boxes in articles of organization/incorporation.
- Obtain your EIN
Most businesses would need an employer identification number (EIN) when forming an LLC or Corp. You’d also provide this 9-digit number when opening your business bank account and applying for credit rather than your personal guarantee.
Fortunately, obtaining an EIN is painless and free.
- Grow your brand
Now that your business is a legally recognized entity at the federal level, the ball is in your court to grow it. Leverage technology, hire a diverse team, outsource processes, vamp up your digital marketing, and see your online business breaking new grounds.
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