The ChooseWhat Newsletter

How To: Incorporate a Business

by: Jen Udan |

When you register your business, you are creating a legal entity and, as such, will be afforded significant benefits under the law.

Incorporation PapersThere are numerous options available to you when it comes to incorporating your business. Since all businesses are different and have different present and future needs, ChooseWhat and the Austin Technology Incubator (ATI) recommend that member companies and applicants hire an attorney to evaluate your company's position. When you are just starting out, though, and do not need to indulge in complicated corporate maneuvers such as obtaining financing, the standard ChooseWhat suggestion is to incorporate as a Limited Liability Company (LLC).

An LLC is a very popular type of business structure that blends the benefits of limited liability of a corporation with the favorable tax treatment of a partnership. The company's income "passes through" the corporation and is treated as the personal income of the owners. This allows you to avoid having the earnings taxed at both the corporate and individual level. Once you form an LLC for your business, that LLC will be legally recognized as an independent entity that has its own unique Employer Identification Number (EIN), which is the equivalent of a Social Security number for a person. Once you have an EIN for your business, the company can have its own bank account, purchase insurance, take out a loan, and take advantage of all kinds of other corporate services.

 Before you incorporate your business, you should:

  1. Name Your Business

  2. Set Up a Phone Number

  3. Set Up a Business Mailing Address

Register your Business

  • Hire a Corporate Attorney. This is the best way to go, although it is pricey. Be prepared to spend several thousand dollars. The exact cost will depend on your attorney’s hourly rate and how complicated your situation is.

  • Use Legal Zoom. This is the easiest and most cost efficient way to go. LegalZoom is a service that is available in all 50 U.S. states. It provides you with a simple questionnaire to fill out about your business, and then it creates, reviews, and files your business entity papers.

  • Do it yourself.  (Not Recommended)  This is the cheapest way to go but it carries the most risk. You can go directly to your Secretary of State and, in most states, file your application online. However, if you don’t know what you’re doing you could very easily mess up your paperwork, which would cause your application to be denied. At the very least, this would slow you down and at worst, could create more complicated issues for you to deal with.

Apply to be part of the ATI community of entrepreneurs.

Other Types of Business Entities:

Many business owners find it favorable to register their business as an LLC. However, you should familiarize yourself with other types of business entities and the advantages and disadvantages of each particular structure. What's more, even if you start as an LLC, you can always change your structure later. As a member company of ATI, you will have access to its "Trusted Partners" list of service providers, which includes law firms. For more information on these options, visit our STARTicle on the different types of business structures.

Fair Warnings

  • Disclaimer on Legal Advice:  We are not attorneys and are unqualified to give legal advice. We strongly recommend consulting with an attorney if you can afford it. In addition, the information on this guide is limited to standard practices and the best of our knowledge. A good attorney will be able to help you come up with a creative solution if standard practices don’t fit your particular situation. However, this guide should give you a basic understanding about business entities and the tools to get started if you choose to do so.
  • Disclaimer on Tax Advice:  We are not accountants. Do not rely solely on this information to file your taxes. Each state has its own tax code, which you will need to consider in addition to the tax information in this guide. We recommend consulting with an accountant about your particular situation in the location where you choose to do business.