MyCompanyWorks makes it simple to start and manage your business entity. In this article, I’ll share insight regarding how to incorporate your business somewhere other than your home state and why it might be beneficial for you.

In this article, we’ll cover:

• Why you would choose another state to incorporate your business
• Liability protection
• Convenience
• Restriction on type of business if it is in another state
• Pros and cons of incorporating a business in Delaware, Nevada, Wyoming and New Mexico
• Incorporating side projects or another business in different states

Why you would choose a state other than your current state to incorporate a business

It does make sense to choose your home state to incorporate a business in many cases, if not most. Although, there are a lot of reasons to incorporate other places. The two big reasons to incorporate in another state come down to liability protection and convenience.

For most business types that aren’t state-only licensed, you are able to incorporate outside the state you reside in.

Liability Protection & Convenience

The protection your business is supposed to provide your personal assets is called your corporate veil or your LLC veil. It’s one of the reasons you incorporate in the first place. You want the protection. You don’t want to lose your cars, house, or other assets.

If you’re in California and have a business entity incorporated there, about 25 to 50 percent of the time, the courts will pass right through your business entity and go straight for your personal assets.

They can even go for the assets of other people in your corporation.

This is an extremely important factor to consider, along with convenience, when decided where to implement your corporation or LLC.

States like New York and California have non-business-friendly courts and laws. However, Delaware, Nevada, Wyoming, and New Mexico have business-friendly laws and courts that will help protect yourself, protect your personal assets, and frankly protect your directors and officers as well.

Most business types can incorporate in other states, even ones that would surprise you like restaurants. The ones that can’t be incorporated across state lines usually require some sort of professional type entity from your home state, like a doctor’s office. But almost every other business that’s not professionally licensed, or some kind of a state-only licensed business, should be just fine incorporating in another state.

So, we’re talking restaurants, t-shirt businesses, manufacturers, service businesses, software–whatever–almost all of these can choose a different state than where they’re currently formed.

Here are some of the pros and cons of operating in each of the most business-friendly states.

Pros and cons of incorporating a business in Delaware

Delaware is known for being extremely business-friendly. They have a large business court infrastructure just for dealing with business cases quickly, and if you ever want to have a funded startup, VCs will almost certainly require that you set up a Delaware C-Corporation.

Around 90% of the Fortune 5000 are incorporated here! Obviously, there are some very good reasons why.

One of the biggest reasons is their massive Chancery Court system that specializes in quickly dealing with corporate legal issues. The infrastructure is there to support businesses quickly and efficiency with strong business protection and a strong business veil.

Large companies like Uber and Facebook may get sued 100 times per day. Delaware has the capacity to handle issues at a large scale, and that’s why this is the top choice for big business.

Pros of Delaware

• Use the business-friendly chancery court
• Prestige of owning a Delaware corporation
• Protection of personal assets
• Efficiency from

Not everything about Delaware is perfect for incorporating every business, however. Someone has to pay for that massive court system, so fees to incorporate here are pretty high.

You’ll also have to maintain a registered agent in Delaware (this is a service we provide for all 50 states). Then you also have to pay their “franchise tax” and file expensive annual reports.

The general complexity of filing and maintaining a Delaware business entity is a challenge as well, and most small companies don’t need this extra work, especially with some of the other states we’re going to talk about.

Cons

• Adds another level of complexity
• Have to pay franchise tax
• More expensive in general

Fun fact: you can get expedited filings of various levels in Delaware, up to a 2-hour filing for $500 extra!

Pros and cons of incorporating a business in Nevada

Nevada built an extremely friendly shareholder set of laws. As recently as a year or two or go, the veil had only been pierced in Nevada once. Nevada represents the “wild west” in terms of business law, in sharp contrast to nearby California. This libertarian approach makes it extremely pro-business with a strong business veil.

Pros

• Shareholder friendly laws
• Strong protection
• Don’t report certain things to the IRS

Of course, by incorporating in a state so lax that prostitution is free, you may get a bit of a stigma, depending on your type of business. Let’s just say that a Nevada-addressed corporation doesn’t carry the prestige that a Delaware one does.

Because of the rush of companies wanting to incorporate in Nevada for their lax approach to business regulation and taxes, the state has made filing a bit more expensive, so that’s another downside to the state.

Cons

• Some scammy operations
• Negative stigma
• More expensive to incorporate here

Fun fact: all other states have reporting arrangements with the IRS, however the Nevada Secretary of State, department agencies, and taxation agencies do not. So that means they don’t report certain things to the IRS, which basically is a way for the IRS to figure out what you’re doing. This is huge for business privacy.

Pros and cons of incorporating a business in Wyoming

Wyoming created the LLC in the late 70s, based on a simplified corporation business entity concept that existed in Europe at the time. There was no such thing as an LLC not that long ago.

Wyoming also adopted extremely favorable laws for business, similar to Nevada. However, incorporating and managing a Wyoming business is much, much cheaper. It’s about ⅓ the price to incorporate and LLC in Wyoming, and about ⅙ to incorporate a C-Corp. Yearly management fees are much cheaper as well. This is one of the cheapest and safest states you can choose for your business.

Pros

• Very low cost of operations
• Speed to incorporate is very fast
• Strong protection

Cons

• Not super popular
• More difficult to go get a local bank account
• Certain stigma

Fun fact: a lot of people don’t know how great an opportunity it can be to incorporate in Wyoming, it’s called “Switzerland of the Rockies” and “Dick Cheney’s House of Secrets” in some circles because of the favorable business setup.

Pros and cons of incorporating a business in New Mexico

The New Mexico LLC comes with real privacy right out of the box. With an LLC in New Mexico, you don’t have to file an annual report. In fact, you don’t even have to register your name on the business, just a registered agent, which you can hire (we can help with that). There doesn’t have to be proof of any ownership by anyone!

Pros

• Doesn’t list anyone on their formation documents
• Unparalleled privacy
• No record of who you are

As usual, nothing is perfect. If you’re not listed as the owner of your business, a bank will have a hard time verifying you own it and it could be a challenge to set up your business banking with this entity.

Cons

• Banks will have a hard time verifying who you are

Fun fact: since New Mexico doesn’t require an annual report, when you file you get essentially a lifetime filing!

States to be avoided

States that tend to lean toward the left generally have less protection for businesses. More liberal states tend to be more likely to rule against a corporation and try to pierce the corporate veil.

The worst states for this of course are:

• California
• New York

In general, a more conservative state, like Texas or Tennessee, is going to be fairly pro business.

Starting a side project in another state

If you’re thinking of starting a project on the side, it could be great for you to research and look into a side entity. This gives you flexibility and the benefits we’ve discussed if you incorporate in one of the states above. You can set up one side LLC to manage all of your projects under, and when they take off you can split them off into their own, separate entity. We’ve written about this specifically here.

To Recap

• Incorporating in another state can be really great, but it depends on the type of business and specific needs.
• If you want privacy, incorporate in New Mexico.
• If you want protection, incorporate in any of the states mentioned, especially Delaware and Nevada.
• If you want to save money, incorporate in Wyoming.
• Incorporating in a different state is incredibly easy with MyCompanyWorks!

Accounting is one of the most crucial functions of a business, but today’s entrepreneur needn’t worry. Numerous accounting software programs are available to help manage the financial transactions of your business, with programs ranging from basic accounting to total management of your company finances (also known as Enterprise Resource Planning or “ERP”). The use of accounting software enables companies to utilize the resources in their departments effectively, diminish costly accounting mistakes and improve operational efficiency.

NolaPro

NolaPro is a customizable accounting solution developed by Noguska LLC. This software features order tracking, POS, inventory and more.

NolaPro features a module in which companies can monitor sales, develop customer profiles and incorporate employee tracking time and other management applications. Its accounting ledger includes double-entry accounting, a balance sheet, account summarizations and the capacity to produce profit and loss reports. NolaPro offers an accounting solution for companies that need to manage employees, vendors and customers.

In the payable module, companies can generate vendor bills, produce aging reports, monitor credit card purchases, as well as check the status of payments. This software is perfect for businesses in various industries including pharmaceuticals, architecture, hospitality and telecommunications.

Sage 50 Accounting

Sage 50 is an ideal accounting solution for small businesses with products such as invoicing and billing, software analytics, security reporting and inventory management.

Sage 50 incorporates built-in data checks that detect accounting mistakes as well as suspicious transactions. Its security and audit functions enable users to monitor who is editing and entering data or accessing certain functions. The software includes analytics and forecasting that can be exported into Microsoft Excel.

The inventory management platform of Sage 50 helps users monitor inventory based on qualifiers including size, style and color. The system tracks inventory and creates a purchase order particularly when levels are running low. Sage 50 gives industry solutions for various business sectors including accounting, manufacturing, distribution, and construction.

Sage Business Cloud Accounting

Sage Business Cloud provides modules that enable you to create invoices, manage quotes, handle and submit VAT and cash flow forecasting.

For the $40 Sage Business Cloud plan, you receive user-friendly modules to manage invoices, quotes, submit VAT online, cash flow forecasting, smart bank feeds, multiple currency support, reconciliation and project tracking. Comprehensive video tutorials and free unlimited 24/7 telephone and email support is included with your plan.

NetSuite Financials

Netsuite Financials is the number one cloud provider of Enterprise Resource Planning. It is also recognized as the most suitable financial management system for growing companies in need of group consolidation, tax compliance, and multiple language support.

NetSuite’s basic accounting software is specifically designed for mid-sized to large-sized companies with more than 50 employees.

Sage Intacct

Sage Intacct is another highly-recognized provider of cloud-based accounting. Its software applications are perfect for small and mid-sized businesses and can offer real-time operational and financial insights with the capacity to automate critical procedures.

Sage Intacct provides users with a wide range of accounting applications including accounts receivable, accounts payable, general ledger, order management, and cash management. It includes time and expense management, built-in reporting and dashboards, revenue management, multiple entity consolidation and project accounting.

This accounting software has the capacity to integrate with other business applications such as POS systems, CRM and payroll systems to give users the option over which applications they wish to leverage in their organization.

Cougar Mountain DENALI

Cougar Mountain software is an accounting solution that has the capacity to customize ten integrated modules. This software is ideal for small and mid-sized businesses and can be installed in the cloud or on premises. The major features of Cougar Mountain include internal controls, individual user rights, rental equipment tracking, customizable reports, audit trails and FASB and GAAP compliance.

Denali Business provides accounting functionalities such as data analysis auditing, reporting and multiple location inventory management. For non-profits, Denali Funds offers a grant, donation and overhead accounting solution.

Cougar Mountain Denali Business solution provides business assistance particularly in controlling and monitoring the flow of business resources. Moreover, it allows businesses to manage multiple invoices, collection status and client information. Other features include bank reconciliation, purchase orders and a payroll system.

Deskera ERP

Deskera ERP is a comprehensive business management suite that automates distribution, billing, sales, purchasing, payment processing, product receipt, sales commission calculations, asset management, warehouse management, bank reconciliation, core accounting, sales tax compliance, financial reporting and multiple currency support including the ability to print checks.

Deskera ERP also offers built-in integration with other third-party solutions such as UPS, Orderful and AvaTax. It is customizable for user preferences, rules, alerts and automated workflows. Deskera ERP can be accessed from any browser independent of the operating system. It comes with an Android and IOS compatible mobile app. This software is perfect for small and mid-sized businesses.

Adaptive Insights

Adaptive Insights offers a web-based system for reporting, forecasting and budgeting. This software is useful for companies of all sizes. Adaptive Insights eliminates the need to buy new software or hardware. The interface is customized similar to Excel using familiarity to accelerate the training process.

Adaptive Insights assists the needs of various business types ranging from small and billion-dollar companies to non-profit organizations. The main features of the software are forecasting and budgeting, dashboards, reporting, financial modeling and administration.

Adaptive Insights serves the needs of healthcare, business services, non-profit organizations, software companies and manufacturing businesses. It has an extensive partner network in various nations. When you purchase this product, you gain access to training and support services as well as strong implementation.

Budget Maestro

Budget Maestro offers a comprehensive accounting solution capable of forecasting, budgeting, reporting and consolidating. Budget Maestro is perfect for industries such as healthcare, manufacturing, retail, non-profit organizations, business services and wholesale distribution. This software also offers a centralized database that updates any changes to a company’s data.

Budget Maestro has a calculation engine that ensures all computations are grounded on sound accounting principles. Budget Maestro has a “financial intelligence” that automatically builds the balance sheet off the profit and loss activities and automatically builds cash flow statement from the balance sheet.

Acumatica ERP

Acumatica ERP is a mobile-based and cloud-based enterprise resource planning solution, which allows a real-time view of the operations of your business. Together with its global network partners, Acumatica ERP offers a complete suite of integrated applications relevant to business management such as professional, financial accounting and distribution services.

The distribution management feature of Acumatica enables users to handle orders and quotes, automate purchasing, track inventory and enhance customer service. The program is completely integrated with manufacturing, CRM and financials as well as project accounting for transparency across the organization.

The project accounting feature of Acumatica offers solutions for timesheets, complex billing and budgeting as well as project inventory. It aids built-in accounting tools including accounts receivable, accounts payable, general ledger, purchase orders, sales orders, time and expense mobile applications and inventory management.

Wave

Wave is a cloud accounting software customized exclusively for small businesses. Compared to other free accounting software programs that restrict functions, Wave Financial provides a comprehensive accounting feature without monthly costs.

Wave Financial is free and is best used for service-based businesses. It is an ideal fit for freelancers, consultants, self-employed entrepreneurs and small businesses that have 10 or less employees.

Wave Financial allows you to make an account in just a few clicks by entering your email address and password. After completing the signup process, you can start customizing your account by completing your business type and company name.

Once you login, you will find a sidebar menu categorized into banking, accounting, sales, reports and purchases. Wave has a user-friendly interface that helps you run financial reports as well as perform basic accounting with great ease.

FreshBooks

FreshBooks is a convenient and easy-to-use accounting software. With just a few clicks, you can easily add billable time and expenses, establish recurring invoices, customize the appearance of the invoice and set up automatic payment reminders.

FreshBooks connects to your bank, tracks time, produces reports and assists you in managing projects. Like most other accounting software, FreshBooks provides various pricing plans, based on the number of clients you have. One distinguishing feature of FreshBooks is that it aids financial education for college students by giving free accounts. It also offers classroom materials to college students and educators.

Kashoo

Kashoo is an accounting software that is ideal for small business owners, freelancers and independent entrepreneurs to handle audits, taxes and other accounting functions. This software is accessible on mobile devices via an iOS app.

Kashoo enables users to operate in offline mode and synchronize data as soon as there is an established internet connection. It aids accountants in creating and sending invoices through the use of customizable templates. Users can track expenses by attaching images of receipts and can also file expenditures under the appropriate account to make it accessible during tax filings.

Kashoo allows users to automate bank reconciliation by synchronizing data with banks all over the world. It enables business owners to create financial reports, accounts receivable, profit and loss statements balance sheets and more. The solution also provides a dashboard that enables users to forecast data based on current figures.

Zoho Books

Zoho Books is an accounting software that provides the basic features every micro business needs. It also offers advanced tools as well as integration so that the company can continue using the software even as it grows. Zoho Books has low pricing in comparison to competing accounting software. Their basic plan only costs $9 per month while the professional plan is $29 per month and supports 10 users.

Zoho Books is an easy-to-use application with simple and fast account set-up. You simply need to enter your business name, password, contact and payment information.

Zoho Books enables you to save time through workflow automation. Use the software to perform automatic tasks such as securing payment reminders and invoices, tracking expenditures and sending notifications when your bills are due for payment. You can also convert sales orders and perform invoice estimation with just a few clicks. Zoho Books enables you to track the time and has a project management tool feature, which allows you to bill based on task hours, staff hours and project hours at a fixed cost.

Quickbooks

Intuit Quickbooks is an accounting software application perfect for small to medium-sized businesses. Quickbooks provides functionality to handle multiple locations, users, large quantities of transaction data or inventory workflows.

Intuit Quickbooks offers customized reporting tools that aid users in data analysis and making informed business decisions. This software application integrates with Excel to expand its reporting capacity. Quickbooks provides tools for scanning and attaching documents such as quotes and receipts. This solution allows businesses to arrange documents into categories and monitor significant accounting files. It maintains a change log to document changes within each report with a proper timestamp and date. The program also allows organizations to monitor employee information and secure regulatory compliance.

KashFlow

KashFlow is one of the easiest accounting software applications to use. It helps in importing data from Excel, Sage and Quickbooks. KashFlow’s interface is direct and it has various templates and invoices that you can use right away.

This application has lots of functionalities that encompass all the major needs you would expect. You can handle supplier and customer details, automate purchases and records, automatically import bank transactions and have the system notify you of late payments.

AccountEdge Pro

AccountEdge is an accounting and management solution that works with both Windows and Mac operating systems. This software application is ideal for small businesses and aids users in creating and tracking sales as well as purchases, running payroll, monitoring and creating inventory and managing time.

The major features of AccountEdge are banking, payroll, invoicing, purchase orders, inventory, time billing and e-commerce. Users can manage orders, quotes and invoices for time, services and items sold. Payments are processed on invoices and orders.

AccountEdge’s banking tools allow users to send and receive money, prepare deposits and electronic payments, print checks and reconcile accounts. Its purchase orders feature allows users create and track purchase orders and bills. AccountEdge also enables users to create an e-commerce platform, allowing them to sell items online.

When you see an apple with a single bite, the first thing that comes to mind is Apple Inc. A swoosh design is associated with Nike, a three-stripe design is associated with Adidas, and the golden arches with McDonald’s. Even if the name of the company is not displayed on the logo, almost everyone can easily recognize the brand.

A logo is an essential aspect of a business that performs a key role in branding. Business experts consider logos one of the best tools companies can use to attract customers. When customers see your eye-catching logo for the first time, it automatically gives them a unique view of your brand identity.

Kickstart your business plan by having a good logo design. Here, we gathered some of the best free logo design services online and some inexpensive ones too.

1. Brandmark.io (http://brandmark.io/)

Brandmark.io, which helps you establish a branding system with the assistance of a design team, is one of the best sites for a one-of-a-kind logo for your new business. Brandmark.io’s designs are engaging and remarkably distinct. You simply input your preferences, and the AI design system will generate several logo ideas for you to choose from.

When you create logos using Brandmark.io, you can do anything you want from resizing to recoloring and customizing without needing another designer or software. You can export the completed design in various formats such as EPS, SVG, PDF, and PNG using either web, mobile, or PC platforms.

A basic logo costs only $25; however, it is not editable. Designer and enterprise logos cost $65 and $175, respectively.

2. Logo Maker (https://logomakr.com/)

LogoMakr believes that a beautiful logo should come at a nice price to help you start your new business. With an easy-to-use design software, you can create a high-resolution logo for only $39.95. If your logo does not require high-resolution files, it’s completely free.

With a free web logo, you can create and save the design and then copy and paste the HTML code that accesses the design from LogoMaker’s server. You can use the logo on your webpage for free. With high-resolution logo design files, you will get your logo in EPS, JPG, PNG, and GIF format.

LogoMaker offers a money-back guarantee. It offers more than 10,000 professionally designed icons and more than 50 fonts to choose from. With LogoMaker, you can make up to six designs for comparison before purchasing the logo of your choice.

3. Canva (https://www.canva.com/)

If you’re looking for a brilliant and individualized logo using simple design tools, Canva is another great option to consider. It has a wide selection of logo templates that you can use to generate your logo design ideas in minutes.

To enjoy Canva’s services, simply create a free account, explore professionally designed templates and customize the design using your own choice of colors, graphics, and fonts. Finally, save your logo and share it with the world.

Canva templates and design tools are all free to use. Canva also has premium images that you can purchase for only $1 per one-time use. When you have a Canva logo, you can post it on your social media channels by clicking the SHARE button. See amazing things happen after that such as gaining followers, widening your fan base and obtaining new clients.   

4. Free Logo Design (https://www.freelogodesign.org/)

Free Logo Design offers a completely free logo to the benefit of entrepreneurs, freelancers and small businesses. With just a few clicks, you can have a stunning logo design right at your fingertips. You can also choose from thousands of talents and edit the logo until you become fully satisfied.

To use this service, start by choosing a name for your business. Browse and select the template you want to use for your logo. Customization can help the logo look even more striking. Simply change the font, color and shape; then save the logo.

You do not need to pay anything when downloading the logo you created. Free Logo Design is 100% free, easy to use, and helps enhance your branding. Design a free logo to save on the upfront costs of starting your business.

5. Free Logo Services (https://www.freelogoservices.com)

Free Logo Services has thousands of logo designs that can easily be edited. All you have to do is choose the template and customize the layout, text, fonts and colors. By using this site, you will receive ten logos in different file formats. If you need a logo for your social media accounts, just request the file format.

Free Logo Services helps you grow an online presence. Step up your game by being creative and innovative. After designing your logo and deciding to use it, you only need to pay $39.95 for the files.

6. GraphicSprings (https://www.graphicsprings.com/)

GraphicSprings offers a simple solution for startups and entrepreneurs to improve their branding – the creation of a free logo. GraphicSprings has a gallery of logo templates where you can choose the one you like best and customize it. The gallery has categories that range from education to business to photography, and a lot more.

GraphicSprings has a user-friendly logo maker platform that lets you edit the text and graphic of your template easily and conveniently. Be playful and creative when creating your logo. As soon as you have completed the editing and customization processes, you may download the logo and pay only $19.99.

7. Designimo (https://www.designimo.com/)

Is your company in search of a new professionally designed logo? Designimo offers cost-effective solutions to individuals and companies. This site offers graphic design and custom logo design to numerous industries.

Designing a logo in Designimo is entirely free. However, if you decide to download high-resolution files, you only need to pay $29.95. The files come in JPG, PNG, and EPS format. Designimo does not allow refunds.

8. Logojoy (https://www.logojoy.com)

If you are an entrepreneur with a passion for branding, let Logojoy assist you. Logojoy is a logo design company based in Toronto, Canada. It is one of the most-trusted sites for logo design and has been featured in The Globe & Mail, Creative Review, Lifehacker and TechCrunch.

To use this site, you need to enter the name of your business or company. Choose the style, icons and colors you want to use in your logo. After just a few clicks, you will be presented with logos specifically tailored to your preferences. Customize your personal logo by changing the font size, spacing and more.

Logojoy’s pricing varies. Downloading a low-resolution logo file only costs $20 but if you wish to download a high-resolution logo file, the cost is $65.

9. Designmantic (https://www.designmantic.com/)

Versatility is Designmantic’s name of the game. Once you start your logo design, you will receive other services ranging from business cards to building websites. You have the option of creating the logo design yourself or getting assistance from the site’s community of graphic designers.

Designmantic is easy to use. The initial step is to type in the name of your company. Then, select the industry, choose your design, and pay only $37 if you want to download the logo’s image file. Upon purchasing, you will receive your logo in three different formats: PDF, JPEG, and PNG.

10. Wix (https://www.wix.com/logo/maker)

Wix is one of the newest website creators today. Did you know that with Wix you can also create your professional logo? The procedure is as easy as 1-2-3. Respond to the questions, and you will be directed to the design that matches your preferences.

If customization is your cup of tea, Wix allows you to customize the logo size, text, color, and font. Creating the logo is free. If you love the design and want to download it, you will need to pay just $12.99 for a basic logo, which consists of high-resolution logo files and full commercial usage rights.

A professional logo costs $49.99, and the package includes vector files, social media kit, high-resolution logo files, print-ready files, brand guide, and full commercial usage rights.

11. Logo Genie (https://www.logogenie.net)

Logogenie offers a free logo design system to make cost-effective logos without compromising quality. With Logogenie, you can experiment with colors, fonts and icons. If you need assistance, the site has a customer support team to answer your queries.

The logo design process in Logogenie is easy to navigate. The first step is to enter your slogan and your company name. Then choose the icon of your choice from the site’s icon library. Feel free to customize any aspect of your logo design and save it by clicking the OK button.

Your downloaded logo costs $19.90 and comes in various formats including PNG, JPG and PDF.

12. LogoGarden (https://www.logogarden.com)

LogoGarden was founded by a group of professional graphic designers with years of experience in developing global brands. The site offers a broad range of digital file formats as well as custom logo designs. LogoGarden does not mention the cost of its service; however, the site claims to offer an affordable price for logo design.

Summary:

The logo sites mentioned in this article are only a handful of the best logo design makers online. There’s no better way to leverage your business and enhance your branding image than having a professionally designed logo. We work with and have arranged discounts with the following highly professional logo designers:

Featured Partner: crowdSPRING

We recommend crowdSPRING because they help business owners who need quality, affordable design services with a talented community of over 200,000 professional designers. We’ve secured $25 off and free advanced promotion ($99 value) for our clients. Discount is applied at checkout by using this link.

Featured Partner: 99designs

99designs is a unique way to get the perfect logo: designers compete to make the perfect design for you and you pick the winner! A design you’ll love or your money back!

LLC vs. S-Corp (hint: you may want both)

Which is right for you? An LLC or an S-Corp, or maybe neither? (Hint: the answer could be both) This article covers the benefits and drawbacks of each entity, as well as the benefits and drawbacks of doing business as a sole proprietor or regular corporation, also called a “C-Corp.”

Do I have to incorporate a business at all?

In some cases, your local, state, and federal government doesn’t care if you incorporate your business or not so long as you are operating under your own name and reporting any business income and paying taxes on that income. There are a lot of people that do this—local handymen, t-shirt printers, artisans, and so on, although they’re not always operating legally.

Some jurisdictions will require you to obtain a business license even if you’re doing business under your own name. You can usually just go to your city hall and fill out some forms, or you can take care of everything online here.

If you’re just doing business using your own name or you simply have a business license, your business entity is called a “sole proprietorship” or a “DBA” which stands for doing business as. Some jurisdictions also call this an FBN or fictitious business name if you’re using a name that is not your own but have not filed a formal business entity.

This is obviously a fast, cheap, and easy way to get started with your business, but it could cost you everything. You could be personally sued and lose your personal assets in the course of doing business. If you’re doing something relatively simple and safe, like designing t-shirts or selling cups online, your likelihood of being sued is probably low. However, if you are sued you could lose everything.

Why to incorporate

If you incorporate a business, that business becomes a separate entity that protects you from personal liability.

Let’s say you have a business mowing lawns, and during the course of a day you accidentally injure someone or damage their property. If you have a separate business entity, like an LLC or S-Corp, then the plaintiff will have to sue that business and only business assets can be affected, which are often minimal for small businesses.

If you don’t have a legal business entity, then you could have to sacrifice your house, your car, and anything that you own to cover the damages.

When you incorporate a business, you also own that business name and show that you’ve taken steps to become a legitimate legal entity.

This is why most people today choose to incorporate as either and LLC, S-Corp, or combination of the two. Since business filing starts at $79 and can protect you from losing everything you own, it’s kind of a no-brainer.

Let’s look into the two most common types of small business entity.

What are the benefits and drawbacks of an LLC?

LLC stands for Limited Liability Company because it limits your personal liability without all the complications of setting up a corporation. The LLC was invented over 40 years ago in Wyoming, based on a European business entity, and today LLCs make up over two-thirds of all new companies formed.

LLCs are much simpler than corporations. If you form a corporation, you have to have shareholders that elect directors—so now you have a board of directors. Those directors appoint officers—so now you have a president, vice president, etc. who then run the company. It’s a complicated three-level structure, and for most small corporations, you are all three of those—the shareholder, director, and officer. But in that set up you have to wear multiple hats, so nobody really wants to do all that unless you need to start a big company right away.

That’s why so many people choose the LLC—fully 70% of businesses formed on MyCompanyWorks.com are LLCs. They allow you to set up an official business entity that protects your personal assets, while being nearly as easy and simple as a sole proprietorship. Instead of the directors, officers, and shareholders of a corporation, you only need one person called a member. Most LLCs are single-member LLCs, but you can have multiple member LLCs as well and share ownership.

There are no citizenship requirements for LLC owners and LLCs can own and be owned by other LLCs, which, as you’ll see in the next section, is an advantage they have over an S-Corporation. LLCs are very flexible and you can write operating agreements and rules that allow you to be incredibly detailed on how your business is run or make it very very simple. Many of our customers like to choose the most simple entity that protects their assets and is not hard to run, and the LLC is the best choice every single time.

Also, LLC tax filing is simpler than a corporation’s.

Drawbacks to LLCs are very minimal. The only downside is if you ever want to become a venture-capital-backed company, you will almost always have to file a C-Corporation. However, most states will now allow you to convert an LLC to a corporation, so there’s really nothing to worry about. If you want to start your business and protect yourself as simply as possible then get started with an LLC, and when you’re ready to grow, convert it to a corporation.

Most people don’t know that Facebook started as a Florida LLC, and converted to a corporation later when they needed to.

What are the benefits and drawbacks of an S-Corp?

As we already discussed, a huge benefit of having an official business entity like an S-Corp is that it protects your personal assets in case you get sued during the course of business. An S-Corp. provides that protection, plus some added tax benefits as a “pass-through” entity.

The S in S-Corp simply means small. An S-Corp is limited to 100 shareholders and is not taxed at the corporate level. Whereas a regular corporation’s income is taxed twice—once at the corporate level and again at the personal income level—an S-Corp is just a pass-through entity that lets you pass corporate earnings on to yourself and your other shareholders, if you have any.

The drawbacks to S-Corps are that they are limited in size, you have to be either a US citizen or green card holder, and you can’t own other businesses or be owned by another business as an S-Corp, whereas an LLC will allow you to own and be owned by other businesses. S-Corp taxes are also more complicated to file than an LLC, and you’ll need at least a bookkeeper and probably an accountant to help you at tax time. Also, S-Corporations cannot deduct certain items that regular “C-Corporations” can like healthcare and travel. Ask your tax advisor for specifics.

Should I get a C-Corp instead?

The only reason to file a corporation is if you want to have more than 100 shareholders or attract venture capital. Basically, if you want a huge company, then it will need to be a C-Corp. But, if you’re starting out, it might be considerably cheaper and easier to start as an LLC until the time that you know you can attract those shareholders and funding. C-Corp structures, taxes, and filings are the most complicated of all, plus you get double taxed. Current taxation for corporations is 21%, and that’s before anyone gets paid and pays personal income tax. So, if your company makes $100,000 in its first year, the most you can make is about $79,000 before your personal income tax and any state taxes and fees. If you had chosen an S-Corp, you could have been paid almost all of that before having to pay any tax on it.

LLC vs. S-Corp Summary

If you’re just getting started, an LLC is probably the route for you. The setup, management, and taxes are easy. If you’re looking to save some extra money on taxes, you can consider actually adding an S-Corp election to your LLC, which will let your LLC file taxes as an S-Corp. But remember that if you do this, you’ll have to deal with more complicated corporate tax filings, and probably have to hire some help.

Next steps

Once you’ve decided on a business entity, you need to choose which state you want to file it in. 9 out of 10 times that will be your home state, but there are advantages to filing in other states, especially Delaware, Nevada, and Wyoming. Once you file, you’ll need to apply for your FEIN, which is basically your business’s social security number, and then open a business bank account. Check out our business startup checklist to see everything you need in one place.

Best of luck!

Did you know?

The corporate tax rate was just lowered to 21%.

A husband and wife can count as a single shareholder for an S-Corp.

If you go to get venture capital or funding, they’re almost certainly going to require you to get a Delaware C-Corporation. Delaware has very favorable laws for business.

Large corporations typically own and create other corporations to separate liability. For example, Amazon may file a separate corporation for a single distribution center and own that under another corporate entity.

Did you learn something from this article? Share it with friends who are interested in starting a business of their own, and subscribe to our newsletter below for regular business startup and management updates and education.

Don’t underestimate the potential of a side project (or “side hustle” as they’re commonly known): many multi-million dollar companies started as side projects. Twitter, Craigslist, Slack, Groupon all started as a side project.

Typical Side Company Setup

Most people simply work on their side project while they still have a job and then if it takes off or at least becomes “ramen profitable” (where you are able to at least feed yourself with your side hustle income) then they create a company (register an official business).  

However, there are risks with doing it this way, especially if you have many business ideas. First, since your initial work isn’t within an official incorporated business (a Corporation or LLC, an entity that is separate from yourself) you might expose yourself to liability.

For example, you might have some beta users or first customers of your side business but since you aren’t an incorporated entity yet, you may be held personally liable for the business and these customers may be able to come after your personal assets in a lawsuit (home, cars, etc.). This is the infamous “customer slipped on your driveway then sued you” nightmare scenario (or if your technical product messed up their computer or network, for example). Continue reading “How to Create a Company to Manage (and Protect) Your Side Projects”

I recently spoke to Allan Dib (the bestselling author of The 1-Page Marketing Plan), and he mentioned that changing your company name is like “performing heart surgery on a company”. After just going through a company name change, I tend to agree.

There are many moving parts and action items to think about when changing a company name. From choosing the name, to filing the business name change with the IRS (or whatever your national tax authority is), articles of Amendment with the state (each state you operate in and with every agency you’re licensed with) or filing a DBA name change (if you are organized as a partnership or sole proprietor).

We recently went through all of this with our recent name change so now I’d like to guide everyone with a business name change checklist to review and consider. Below we’ll review if you really need to change your name (or if you’re just thinking about changing your name), how to do the basic rebranding process and finally the checklist of action items.

Step 1: Do You Really Need to Change the Business Name?

I want to emphasize that while you, as the business owner, probably think the name of your company is very important, your client likely doesn’t give it much consideration at all (as long as it’s not inappropriate, offensive or wildly inaccurate). Think about it, do you really care what the name of your favorite vendor is? Likely not. However, for branding and positioning purposes, a well done name change and rebrand can really inject life into a company’s brand and marketing so it’s important to put some thought into it. Continue reading “How to Change Your Business Name (or Rebrand) including Checklist”

2017 was probably the most important in the history of MyCompanyWorks (formerly MyNewCompany.com) so we wanted to send an update to list what we accomplished and to let our clients and friends know what we’ve got planned for 2018 as well – big things coming!

2017 Accomplishments:

Rebranded as MyCompanyWorks

By far the biggest change is that we completely rebranded our company from MyNewCompany.com, Inc. to MyCompanyWorks, Inc. effective on November 2, 2017. This was a huge change and long debated. You can read our reasons for changing the name in this post but mostly, we outgrew the old name and are dedicated to becoming a complete small business platform to start, manage and grow your business – to make it WORK.

Launched the Startup Wizard

We launched our proprietary Startup Wizard to help our clients set-up their new companies quickly and completely and the feedback has been fantastic! Through one simple dashboard you can follow our interactive checklist to guide you through things like holding an organizational meeting, issuing stock, opening accounts, getting a logo and more.

Made the INC5000

MyCompanyWorks was very proud to have made its debut on the INC5000 in 2017. We’re very proud of our team and thankful to our clients for this great honor. We’ve managed to grow quickly but we’re also proud that we’ve also maintained our perfect A+ Ranking with the Better Business Bureau as well as a 4.8/5 rating on ShopperApproved. 

New Website Design

We launched a fancy new website design that has received great feedback. The design is modern, fully mobile friendly and looks fantastic!

My Account Dashboard Redesign and Improvements

Our My Account Dashboard was also fully redesigned and re-imagined into a beautiful command center to manage your business entity (or many hundreds of entities!). We also implemented many new features like PDF invoices, Task and Alerts for Annual Reports and we’ve recently launched an Account Summary that unifies all of your compliance tasks and billing reminders into one simple monthly email.

Launched our Referral Program

We’ve now given each of our clients a code and coded link that they can share with anyone and get paid for every order they refer to us (and manage their referrals in the My Account Dashboard). A great way to earn some extra cash for spreading the word.

2018 Goals:

We’re not resting on our laurels – we have many great things planned for our clients in 2018 including adding domain names/websites, business licenses and bank accounts to our suite of products that can be added to our business formation service.

Also be on the lookout for massive improvements to our ComplianceLock service, improvement to our Virtual Office service and hopefully, a new Delaware office as well.

Thanks again to our team and especially our clients for placing your trust in us since 2001!

The new tax law, called the “Tax Cut and Jobs Act” (TCJA), was signed into law on December 22, 2017 and is the largest overhaul of the US tax system since 1986. The bill is huge, and actually, in our opinion, makes many aspects of the tax code more complex rather than simpler. Some of the details are not entirely clear yet so we’re still learning more each day as the IRS implements various rules and decisions.

However, there is some very good news for small businesses (under a certain income and of a certain type of business activity) and any business that operates as a C-Corporation.

Continue reading “How the New 2018 Tax Law affects Small Business Owners”

Six years ago, a startup company was purchased in Ohio for $100 million, according to venture capitalist Mark Kvamme. Everyone involved in the deal was excited about it at the time – but they also acknowledged that it wasn’t likely to put a whole lot of money back into the State’s startup community. And that’s something Ohio desperately needed. Continue reading “Why Starting a Business in Ohio is a Very Good Idea – Especially Now”

Quick – what’s the first startup that comes to mind when I mention Chicago? If Groupon immediately popped into your head, you aren’t alone. The Chicago-based startup’s meteoric rise to fame (and subsequent fall from grace) has long defined Chicago’s startup scene – and the startup scene of Illinois as a whole. As you may have surmised, that’s not a good thing. Continue reading “Why Start A Business in Illinois, Anyway?”