Let’s face it, you want to be in business like the big boys and incorporate your business, but you also don’t want to create yourself a future nightmare. Incorporating is a great way to go, and we are all for it and advise people regularly to do it, but you have to do it the right way. If you don’t do it the right way, it can come back and bite you like a rabid grizzly bear. Like anything, incorporating has its weaknesses and strengths, so it is imperative you know what they are. In other words, before you just jump into the pool with the big boys, make sure it’s full of water. Here are a few things that you should know and consider before you incorporate.


Although we might suggest that you have a business before you incorporate as the first thing, in reality, it’s more important to know where you are going to incorporate first. You can always start a business with a corporation if you wish, though again, we would suggest you actually are in business already to be able to plan accordingly. Where you incorporate, what state, or even what country will make a huge difference. Every state has its own incorporation rules. For example, if you live in California, even part-time, or have an address or bank account there for the company, you will be paying California corporate taxes. Even if you incorporate in a state such as Wyoming that has no income tax for corporations, you will be paying it in California. That would be nice to know before you incorporated wouldn’t it? So, research the states where you are and their rules for corporations and foreign corporations.

Why are you incorporating

Know why you are incorporating. Don’t just incorporate because someone said to. If you are looking to save money on your business and you are not making more than fifty thousand dollars a year, it might end up costing you more having the corporation. It will be taxed as a corporation and any money it pays you, will also be taxed as personal income, so double taxation.

Get a lawyer

Yes, we know, a lawyer is expensive, but so is making mistakes in your corporation. Although you can get a corporation off the shelf quite cheaply, this won’t cover a myriad of things that you might be required to do. A lawyer will be more familiar with what is indeed essential and what is not. It will cost more up front, but save you money in the long run.

Corporate structure and shares – articles of incorporation

The lawyer will also be able to help you create your articles of incorporation. These are the instructions and rules to how your corporation operates. Who owns what, who gets to vote for what, and everything else. Yes, you can just jump in feet first with a basic corporation, but you risk disaster. Making a solid set of articles that are appropriate for your specific business and its future plan is tremendously important.

Corporate minutes

This one can never be said enough. Never miss your corporate minutes. In your articles, you can say there is an official meeting only once a year, but you must record the minutes and file them officially. If you do not do this, you will lose whatever legal protection you had with the corporation. If someone sues the corporation and you have not kept up your minutes, they can take everything you own, including your house and bank account. This is serious, never miss your minutes.

Annual filings and fees

Make sure you never miss your filings and fees, as again, you can lose corporate protections if you do. If you miss them for more than 2 years, you can even be delisted, and you would have to go through all the steps again to get your corporation back in shape. If you have any shareholders, they will not be pleased.


Don’t miss filing your corporate taxes, including employment taxes. You might think that the corporation will be the only one that gets in trouble, but as an executive of the corporation, you might end up being on the hook personally for those employment taxes you didn’t pay.

Keep personal and business separate

Another one that cannot be said enough is keeping your business and personal separate. It is easy to just buy that tv at home with the corporate credit card, but if you start doing that you will possibly lose any corporate protections you have. If someone sues you, the courts will look at your business, and see that you attached your personal life to it, and then it becomes open season on your personal assets too. It is probably a good idea to keep a separate set of books for your personal life to prove that you are not using anything of the corporation for yourself. That doesn’t mean that you can’t get the corporation to pay for a car, assuming you use it in business. But the gas from home to work, that expense is all you personally. Make sure you keep them separate. It is an easy trap to fall into, but if you don’t. it’s a disaster waiting to happen.

Having a corporation is a great thing and offers you numerous advantages that you can’t get with just being self-employed. But you must also follow the rules or you won’t get all the protections and advantages that you had. Business is business, and legal is legal, and make sure you understand that and keep it separate from your personal life, and keep everything up to date.