Q&A: How to Incorporate a Small Business?

Question: I lost my job a few months ago because of Covid, and because I have problems finding a new job I'm thinking of incorporating a business. I already have a business idea, but I don't know how to setup a business what I need to do!?

Answer: Each state is a little different, but basically you fill out the necessary forms and submit them to the appropriate agency in your state. It is generally recommended that you then submit Sub-S picks for your business. This way, you can report the income on your individual tax return instead of the corporation's. This is usually a good idea because subsequent distributions of earnings from a standard corporation are considered dividends and are taxed again. When you report your 1040 income, it is taxed once on your tax return and distributions are not taxed again. When you start a business, you must obtain an EIN (Employer Identification Number) from the IRS.

More Q&A's:

  • What is an S Corporation?
  • What business form is the best for us?
  • What is a C Corporation?
  • Do I need a separate bank account for my LLC?
  • How can I incorporate a company in California?