How You Can Start Your Own Business with Company Formation Services

As an aspiring business owner, you might have to face difficult decisions when it comes to starting, running, and growing your business. Many of you will probably be discouraged by the monumental tasks ahead of you but luckily, company formation services are available to help you see your options and help you decide what structure your business will take.

The goal of a company formation service is to help you understand how to form your own company and the options you have to make incorporation easier and more affordable. These services have been helping small business owners achieve their goals for a long time because they understand the challenges you may face, the questions you might have, and your desire to succeed.

Company formation services are committed to delivering high-quality and high-value services at an affordable price and supporting you through the entirety of your business, from initial requirements to HR outsourcing services. With that said, let us take a look at the ins and outs of starting a company on your own and why availing the help of a company formation service is the better choice.

Types of Companies

Types of Companies

  • Sole proprietorship Sole proprietorship is the simplest business form and is not a legal entity. It is the easiest type of business to establish; it is simply an enterprise operated and owned by an individual. A person creates a sole proprietorship by default once they start selling goods or services.A sole proprietorship is not legally separate from the owner so the law does not distinguish between the business’ obligations and the owner’s personal assets. In fact, the assets of a sole proprietor can be, and are often, used to satisfy the liabilities and debts of the business. You should also remember that accidents can happen and businesses end all the time. One mishap can quickly turn into a nightmare for a sole proprietor business owner.
  • General partnershipA general partnership is the simplest variety of partnership. It is created automatically when two or more persons begin to engage in a business enterprise for profit. All partners in a general partnership share in both the business profits and the day-to-day management.A general partnership is considered to have begun, by default, with a verbal agreement or a handshake. Oral agreements, however, are fertile ground for disputes. It is still highly recommended that the rights and responsibilities of the partners are all set forth in a written partnership agreement.Because a general partnership does not offer protection from liabilities, partners are all liable for business obligations and debts and all their personal assets can be used to satisfy those debts.
  • Limited partnership A limited partnership, or LP, is owned by two classes of partners: limited and general. Limited partners contribute capital and share profits, but do not usually participate in management. General partners are the ones that manage the enterprise and are personally liable for the debts of the business. Limited partners also do not incur personal liability for the debts of the partnership beyond their capital contributions.In a limited partnership, there must be at least one general partner with unlimited liability and one limited partner whose liability is limited only to the amount of their investment. Limited partners can enjoy protection from liability just like the shareholders of a corporation or the members of an LLC.
  • Limited liability company The limited liability company, or LLC, is a hybrid business form that combines the ease of administration of a partnership with the tax treatment and ease of administration of a partnership. The LLC is one of the newer forms of organization, with the great bulk of laws authorizing LLCs passing only during the 1980s and 1990s.LLCs enjoy pass-through taxation or sidestepping the double taxation of the profits of the company. LLCs with multiple owners file an informal tax return but do not pay taxes on company profits. The members, or owners, report their share of the profit or loss of the LLC on their individual tax returns and any tax due is paid individually.
  • Limited liability partnership A limited liability partnership is also a hybrid that shares the attributes of limited liability companies, or LLCs and partnerships. The partners of an LLP participate in managing the business just like general partnerships and the personal assets of the partners generally cannot be used to satisfy the liabilities and debts of the business just like in an LLC.The partners of an LLP may also enjoy personal protection from liability from the acts of other partners, although each partner remains liable for his or her own actions. Laws typically require LLPs to maintain cash reserves or generous insurance policies to pay claims brought against the LLP.

Incorporating Your Company

Incorporating Your Company

The paperwork for the incorporation of your company must be filed with the appropriate state agency, usually the Securities and Exchange Commission, or SEC, with the correct amount of filing fees paid. Depending on your location, this process of forming a corporation or an LLC can differ, as well as average costs and timeframe.

  • Fees, documentation, and timeframes The document of a company formation is typically known as the Articles of Incorporation, or Certificate of Incorporation, depending on your location. The formation document of an LLC is usually called the Articles of Organization or Certificate of Organization.The fees that come with filing these documents range widely, from less than $40 to more than $500. The general timeframe to get your incorporation documents approved also varies from place to place. Standard or non-expedited filings of incorporation documents can take four to six weeks before they are approved and returned to the business owner.
  • Required LLC and corporation disclosures Corporations and LLCs must disclose the following information in their incorporation documents, but may vary depending on your location:
    • Company name – for corporations, it usually includes an identifier such as “Company”, “Corporation”, “Incorporated”, or any abbreviation of those terms. For LLCs, it should usually include the term “Limited Liability Company”, or “LLC”.
    • Business purpose – should generally include a short statement of the business purpose of the company and declare the proposed scope of the operations of the company. Business purpose clauses can either of these two types:
      • General business purpose- some places may allow a general purpose clause that indicates that the company is formed to engage in “all lawful business.”
      • Specific business purpose – some places may require a complete explanation of the exact type of business the company will undertake.
    • Registered agent – the party that accepts important tax and legal documents on behalf of the company.
    • Incorporator – the person or company that initiates filing.

 

  • Corporation disclosure requirements  The following disclosures are typically required for corporations only:
    • Number of authorized shares of stock – corporations should set forth the number of shares of stock they wish to authorize and their par value, if any, assigned to those shares.
    • Share per value – or par value, is the minimum stated value of a share of stock. It usually does not correlate with the actual value of a share. Common par values are $0.01, $1, or no par.
    • Preferred shares – typically provide those shareholders preferential payments of dividends or distribution of assets should the company cease operations.
    • Directors – many places require the names and addresses of the corporation’s initial directors included in the incorporation documents. They are responsible for directing and overseeing corporate affairs.
    • Officers – other places may require the names and addresses of officers to be included in the documents of incorporation. Officers are responsible for for the day-to-day activities of the corporation.

 

  • LLC disclosure requirements The following disclosures are typically required for LLCs only:
    • Management structure – LLCs must generally specify whether the company will be managed by its managers or members (owners). When an LLC is managed by members, owners oversee daily operations while LLCs managed by appointed managers resemble a corporation where business management is the responsibility of the directors.
    • Members and managers – Many places require the names and addresses of the initial members or managers be set forth in the formation documents.
    • Dissolution date – Many places do not require, but allow, the LLC to list a dissolution date in the Articles of Organization. A date of dissolution dictates the maximum duration of the existence of an LLC. Almost every place, however, allows for perpetual existence.

Requirements After Incorporating

The requirements imposed on LLCs and corporations do not end simply when incorporation documents are approved by the appropriate agency; they are ongoing. While owners can enjoy certain benefits from corporations and LLCs, they must fulfill responsibilities to maintain those benefits. Failure to comply with these requirements can result in harsh consequences, including potentially losing the limited liability protection given to owners.

  • Internal requirements Corporations are required to do certain ongoing formalities in their internal governance. LLCs do not face the same requirements but it is recommended that they take similar steps. Properly documenting and faithfully undertaking are both very important; failing to do so can result in a loss of limited liability protection for the owners of the company.
    • Internal corporation requirements Because corporations face the strictest requirements of any business type, the following ongoing steps are required of corporations:
      • Create and regularly update bylaws.
      • Hold an initial meeting of directors where officers are appointed, shares of stock are issued to initial shareholders, bylaws are adopted, and initial business decisions or steps are approved.
      • Hold an initial meeting of shareholders to approve the incorporation, initial board of directors, and the steps taken by directors at the organizational meeting.
      • Hold and properly document annual meetings of directors and shareholders.
      • Record changes in company ownership in a stock transfer book or ledger.
    • Internal LLC recommendations Even though LLCs are not required to follow any ongoing formalities, doing the following steps is generally recommended:
      • Create and regularly update an operating agreement.
      • Hold an initial meeting of the members or managers to approve the operating agreement, issue membership interest to members, and accomplish initial company decisions such as opening a bank account.
      • Hold and properly document the actions taken at annual meetings of managers or members.
      • Record any changes in ownership or membership interest in a transfer ledger or book.
  • External requirements These are imposed by agencies and governments on corporations and LLCs. They usually include an annual or biennial filing and payment of a corresponding fee. Almost all corporations must file regular reports with the SEC or any equivalent departments. Annual statements are normally required, but some places are laxer and only require a biennial statement. In either case, filing these comes along with a fee that varies wildly depending on the place and entity type.
    • Additional external requirementsHere are some other potentially imposed requirements you may need to fulfill if you want to start your company:
      • Filing an income tax return and paying necessary taxes.
      • Paying state franchise taxes.
      • Filing annual statements.
      • Payroll tax obligations such as social security and healthcare.
      • Property tax obligations.
      • Sales and use tax obligations.
      • City or municipality tax obligations.
      • Obtaining and renewing any necessary local business permits and/or licenses.
  • Consequences of noncompliance Small business owners often make the mistake of believing that ongoing corporate requirements do not apply to them; perhaps they feel too busy to properly satisfy these requirements. A corporation can be sued when it is unable to show that it faithfully followed all formalities. A judge can even rule that the company was operating more as a sole proprietorship or general partnership, and extend full personal liability to company owners (called “piercing the corporate veil”).

Using a Company Formation Service Like NNRoad

Business owners can use a company formation service instead of incorporating on their own directly with the appropriate agency. Using a company formation service provider like NNRoad has become the incorporation method of choice for many small business owners. They are usually less expensive than using an attorney and generally less time consuming than preparing and filing incorporation documents on their own.

NNRoad can give you general information on business structures and government requirements and will walk you through the incorporation process step-by-step. With NNRoad’s company formation service, you can save time, save money, and easily understand incorporation.

If you are an aspiring business owner and you want to know more about NNRoad, click here. Start your business right and ensure success with NNRoad.

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What NNRoad can do for you?

As a platform, NNRoad selects and engages qualified and professional service providers in target countries/regions to provide company formation, payroll, benefits administration, work VISA applications, and accounting services in multiple countries.