Top Incorporation Choices For Startups in 2022

 November 30, 2021

By  BC Editorial Team

According to statistics laid out by the United States Census Bureau, the section on Business Formation Statistics showed that new business stats confirmed just over 1.44 million applications in Q2,2021. With more than 448,000 new business applications being filed in June alone.

When trying to ascertain what will be the best incorporation choice for a new business venture, it is first vital to understand that the selection of the incorrect option may lead to a variety of administrative, financial, and legal difficulties that will come with the growth of the business. Granted, each business entity option comes with its own distinctive advantages and cons, so before choosing, one will have to consider factors such as the nature, ownership, size, growth, and tax implications of the business.

Under United States law, a corporation operates according to the laws of the state in which they are incorporated. This is due to the fact if it were not so then, businesses could be subjected to 50 different and contradicting sets of state laws. Which would not be conducive to efficiency. Wyoming is one of the top favored states as they are known for their flexibility and taxation laws. Wyoming trust and LLC Attorney provides useful information for those looking at incorporating their new startup.

Apart from public companies which are those that are listed on the JSE and have formed to raise capital by offering securities to the general public and that of state-owned enterprises the following are alternative options in terms of incorporation choices for a startup.

Why is it important to incorporate?

Unless you decide otherwise and take the appropriate steps to change it, your business will fall under a sole proprietorship. This means that there will be an obvious distinction between the owner of the business and the business itself. To put this into perspective, should a customer sue an employee or the business itself, your assets and finances get put on the line, regardless of the situation.

This is why it is always advisable to incorporate your business, regardless of its size. Typically there are four that are the most widely used, namely S corps, C corps, non-profit corporations, and LLCs. Each offering unique benefits that will depend on the nature and size of the startup.

Limited Liability Company

An LLC is set up as a business structure aimed at private companies that are registered within the United States. LLC’s are attractive to small businesses as they combine aspects from both partnerships and corporations. They prove a great benefit when it comes to the flow-through taxation of sole proprietorship and partnerships as well as the flexibility of the two.

C Corp VS S Corp

The majority of major corporations are C Corps whilst smaller firms tend to be S corporations. One of the largest differentiating factors is that C corporations have shareholders who are subject to double taxation, this means that the government taxes the C cops company income at corporate taxation rates whilst taxing the dividends after the corporation distributes them to the shareholders.

Dividends can serve the same purpose as wages and salaries do for “regular jobs”. S Corps do not have the same issue as C Corps as when you pay yourself a salary, the government will not subject the earnings to self-employment tax. And as a startup, S Corps serves as the most likely option as they are designed for smaller companies.

Final Thoughts

When deciding between an LLC, C corporation or S corporation, it is important to first and foremost look at your own individual requirements. Finding the right choice depends entirely on the type, size, and operations of the business. First access the needs of the company and then have a look at what each corporation has to offer. Pick an option that will not just fit your current status but will also benefit the plans that you have for the near future of the business.

It is however almost recommended that new business owners consult with professionals in the field such as Wyoming trust and LLC Attorney, as they will be able to help with an array of needs that your business will have during the startup process. This will ensure that everything is done legally and to your best interest.

BC Editorial Team


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