You are ready to take the jump and legally set up your business. How exciting!
We’ve created this post to guide you through the LLC incorporation process. We will do this by explaining what an LLC is, connecting you to what we think are the best online resources to incorporate your business, and detailing why we recommend incorporating in Delaware.
Let’s get started!
If you’ve done your research, you’ll see one of the first decisions you have to make is whether to establish your business as a corporation or a limited liability corporation (LLC). There are tons of reasons why each is a valuable direction. We recommend incorporating as an LLC for the limited personal liability, tax structure, and governance flexibility.
#1. Limited Liability: Like the name suggests, limited liability corporations reduce the risk that owners face. When you incorporate, you establish a new legal entity that takes on the risk of the business. This means that the incorporated entity (your business) owns the assets, debts and liabilities, not the individual owners.
#2. Tax Structure: As an LLC, you get to choose whether you are taxed as a corporation or as an individual where you pass-through the company’s losses or gains. You do not have the option to choose the structure by which you are taxed as a corporation. If you’d like to learn more, check out The Balance Small Business or Legal Zoom.
#3. Governance Flexibility: LLC’s give you the most flexibility with how you set up and govern your company. As detailed on Investopedia, you are required to provide a ton of additional information when establishing your corporation. When you establish your LLC, you are normally only required to file your articles of organization, which can usually be completed online quickly. Read on to learn how to receive your articles of organization in minutes from home!
With new businesses forming every day, there has been a movement to make the process of incorporation easier for small business owners by taking on the process online. There are tons of websites offering to guide you through this process. To make it easier for you, we’ve simplify this choice down to two: Incorporate.com or Harvard Business Services.
Regardless of which service you choose, you’ll want to make sure you receive 3 things:
#1. Federal Employer Identification Number (FEIN) - This number is your identification criteria for the IRS. You can think of this in the the same way you think of your Social Security number, only for your business. As with social security number, your business will need this number for so many reasons as you go forward.
#2. Registered Agent - Your registered agent is the individual or organization appointed to you (by the service you choose) who will serve as the point of contact between you and the government. They will be your contact in forwarding on your documentation, as well as in an ongoing capacity for things like your annual report form.
#3. Articles of Organization - This document is essentially your announcement of the business. Your articles of organization detail the initial statements you need to make as a business to form your LLC.
Both incorporate.com and Harvard Business Services (HBS) offer access to all three of these features. Either will take you through the process in a way that is both easy to understand and time-efficient. By signing up for “The Essentials” package on incorporate.com and answering their questions, you will receive all three pieces explained above. HBS requires two steps: answering questions to receive your FEIN and articles or organization, then signing up for your registered agent. Once you receive all 3, you’re set to go!
If you’ve taken the time to look at either website already, you’ll likely notice that there is a lot of talk about the State of Delaware. Don’t worry, you’re in the right place! From a startup perspective, incorporating your business in Delaware sets you up for success...here’s why!
Like most laws, each state decides what it will require people to do when they establish businesses. This offers states the opportunity to be “small business friendly”, and Delaware is consistently thought of as one of the most friendly.
Delaware business laws are both flexible and have been around for a while, meaning it is easier to predict how courts will rule in cases based on the large amount of precedents. Relative to other states, Delaware has been establishing a legal framework to support businesses for decades. They even have a business court called the Court of Chancery, which makes legal interactions less costly and more time efficient for businesses.
Looking for more info on why Delaware is a good choice? Check out a great summary from Investopedia.
We know this is a lot to take in and feels like a big decision...after all, this is the formation of your business foundation! That said, don’t let the legal terms scare you away. The walkthrough above is meant to ease concerns and make the process of incorporating more accessible. If you remember what the benefits of an LLC are, utilize either of the online tools to make it a quick process, and trust in the power of Delaware as a small-business friendly state, we’re confident you’ll be launching your business off on the right foot!
Ready to start your successful food business? Reach out to Union Kitchen at apply@unionkitchen.com.