Questions to Ask Before Incorporating

Questions to Ask Before Incorporating

Q. Which entity should I set up?
A. You should consult with your own team members about the best asset protection, based on the nature of your business.

I’ve found the C-corporation the easiest and most useful entity for building your credit file.

You should educate yourself about the pros and cons of the different entities by reading the book Incorporate and Grow Rich.

Q. What state is the best one to incorporate in?
A. Many people receive conflicting information about which state to incorporate in.

First learn about each state’s individual laws, and the time necessary to set it up.  Most state paperwork can be completed online; or try the Socrates Incorporation software available at Office Depot.

To build credit, you should set up the entity in your home state.  There are some benefits to setting up in Nevada, for example, but getting more credit for your corporation is not one of them.

It’s true that Nevada has no income tax, but in your home state you can build credit.  You can probably build some credit with your LLC, but not cash credit.

You may be able to get some supply lines, and maybe a little cash credit; but you’ll only get credit in your home state.  This is a key consideration; open it in your own home state for credit purposes.

Q. What should I name my business?
A. The next critical step in setting up your corporation is choosing its name.  I don’t recommend using your personal name or initials for several reasons.  For one thing, it can increase your chances of getting sued.

We recommend a neutral name.

For example, many companies call themselves “So and So Investments” using their initials or KLC Real Estate Properties, Inc.  Use a name instead like Allied Management, LLC or Allied Management Inc.

Save yourself some time by seeing if the name is available on the Secretary Of State website, so you don’t fill out all the paperwork and try to file it, only to find that a name is unavailable.