Our Bizmaster offers advice on whether to incorporate or not and how to get it done using our partner Clickandinc.com

Before you start your business plan you will need to decide on how you want to organize your business.

To answer this question (to inc. or not to inc?), we will refer you to our strategic partner at Clickandinc.com. Our bizmaster has reviewed the content of the entire site and found two sections of particular importance to the future business owners. The first is a comparison chart of the reasons to select incorporation over other forms of organization and the other is a printable table of all of the important terms used in the incorporation process.

IF YOU ALREADY KNOW THAT YOU WANT TO INCORPORATE SKIP THIS SECTION AND JUMP TO THE SITE OF OUR STRATEGIC PARTNER, CLICKANDINC.COM

From thirty years of small business experience, our bizmaster believes there are only two reasonable choices for very small businesses. That is the s-corporation and the sole proprietorship.

Partnerships are immediately eliminated from consideration because they rarely protect the partners unless a costly partnership agreement is drawn up, and the liability can be infinite for the richest partner. One exception is the Limited Liability Company (LLC) which is a complex partnership which offers unique tax and control advantages. (more on LLC's)

The S-corporation avoids double taxation and allows the business owner to deduct losses from regular income during start up. It forces the business to keep separate organized books (at least once a year during tax time) and if the firm grows, it can be converted into the big brother, the C-corporation. It also forces the business owner to keep good corporate records.

Sole proprietorships exist because they are easy. While there is the obligation to pay taxes, there is no particular obligation to keep separate books and the firm exists because a person says it exist and registers the name with some entity. If accurate books and records exist, the firm can easily grow into a corporation.

The issue of liability is not as clear as many experts claim. If you have nothing to loose, few lawyers would bother to sue you. Really poor people don't need to waste money on incorporation.

When you grow larger and have something to loose, excellent insurance would protect you regardless of your structure. On the other hand, when you are small and want to borrow money, banks will require a personal pledge regardless of the business form.

If you plan to keep your business very small and have adequate insurance and few assets, it doesn't much matter what form you choose. However, if you are planning on growing large, and having personal assets to protect, learn from the big players who chose incorporation.

Overall, if you have enough money to incorporate, and are good at keeping records and staying organized, the s-corporation is your best choice because it will protect you as much as possible when you are small and be flexible enough to protect both you and the business as the business grows. To sign up now, go to:

A note on our strategic partnership with Clickandinc.com

As you might expect, we earn a commission from clickandinc.com just as we do from other advertisers on bizprimer.com. This section on incorporation exists because we find the information offered by clickandinc.com to be valuable to future business owners and it is far more ethical for us to refer you to our strategic partner than it would be to plagiarize the content of their site and claim it as our own.

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LIMITED LIABILITY COMPANIES

This is a very versatile and complex form of business structure. In a corporation, stock is generally distributed by the amount of money invested and control goes to the biggest stockholder. A LLC can be set up with different objectives.

For instance, the general partner could keep control while the limited partners get all tax benefits from profits and losses. This might be important in giving gifts to your children to avoid inheritance tax. The giver (general partner) keeps control until death, but the children get the profits and income during the lifetime of the partnership.

It has also been used for oil exploration where the limited investors get all the tax losses up to the value of their investment and then share the profits from a successful oil well with the general partner. It might also work to keep creative control of a new company while giving investors the tax benefits of losses incurred during start-up.

Unlike a sole proprietorship which exists as soon as a person says it does or a corporation which can be formed on line with our strategic partner clickandinc.com, each Limited Liability Company is so unique that it needs a specialty lawyer and a CPA to set it up properly.