DISCLAIMER: These are just general observations
regarding some of the steps in incorporating a business or forming an LLC
based on some personal experience incorporating in Pennsylvania
and is provided AS IS, WITHOUT WARRANTY OF ANY KIND,
and certainly NOT LEGAL ADVICE. Consult an attorney if you need advice.
Determine whether you should form the business entity in the state in which
you reside, or incorporate in a different state such as Nevada or Delaware.
This comes before determining whether or not to file as
an LLC since that's a state-level entity.
Whether you plan on doing business via postal mail or online-only (PayPal, etc)
may make a difference on what state you file under.
If you file in a state other than where you are physically located,
you will need a registered agent in that state.
Decide whether to file as a federal sole proprietorship (or partnership) / state
LLC
or as an S Corp,
which is an entity type available at both the federal and state levels.
for an LLC at the state level, the business entity at the
federal level could be a sole proprietorship or partnership.
Register the LLC or corporation with the state where the registered agent is located.
In some states, including Pennsylvania (and possibly Arizona, Georgia and Illinois),
a legal notice of incorporation needs to be published.
Using one of the online incorporation sites is probably a lot cheaper
than having an attorney do it, unless you happen to know one personally.
File for a Sales Tax license and any other state registrations you need.
Pennsylvania's PA Open for Business
provides a "wizard"-style process for guiding you through the process:
If you set up the business as a corporation rather than an LLC
and the shareholders want it treated as an S Corp for tax purposes,
file the S Corp election forms with the federal
Department of Treasury (
IRS
)
and the state(s) where their personal income taxes are filed.
For example, if a company formed by shareholders in Pennsylvania and doing business
there is incorporated in Nevada, then filing of S Corp elections with
the IRS and the Pennsylvania Department of Revenue should be considered,
but would not be necessary in Nevada since no income taxes would be filed there.
Note that while you can take advantage of writing off expenses,
you're adding the burden and/or expense of filing various tax reports
- Sales/Use Tax (probably semi-annually, possibly quarterly),
annual capital stock reports and federal and state
income tax filings, including quarterly estimates.
Talking to a
CPA
to find out what records you need to keep isn't a bad plan.
