Last month, I described the process of dissolving the Technically Media general partnership, so I wanted to close the loop by quickly sharing our process for incorporation.
Mostly, this was a lesson in paying for a lawyer — doing it (mostly) right is worth paying. But I also wanted to share a few lessons I learned and some resources I used.
Why we decided to incorporate: (a) I expressed concern that as a new homeowner, I wanted greater protection from liability for our work (like liable or breach of contract concerns), and, as an added benefit, (b) we wanted to be W2 employees of our company, for the credit value of guaranteed payments. Moving forward, we also recognized (c) the benefit for the possibility of hiring employees.
Find the steps and resources below.
Steps we took:
- Get a recommendation for an efficient, effective lawyer. (a small, simple incorporation is relatively straight forward and cost us less than $1,000.00)
- Choose a type of incorporation (if possible, have this in mind ahead of time, so you don’t need your attorney’s consultation on the matter. We went with an S-corp because, as three equal partners, we’d rather not pay federal income taxes and have the gains go to us as individuals.
- Have your attorney file the paperwork with the state and feds
- We now know that to incorporate, you’ll need to assign corporate officers — These don’t have to mean the same hierarchy for staff work, but for corporate structure, ethics, lines of credit, opening bank accounts and the like, you’ll need a president and secretary at least. As partners, we all received equal shares in the company.
- Get your corporate bylaws and endorse them — Our attorney provided us with cookie cutter corporate bylaws in a binder, which we supplemented with some language from our existing partnership agreement.
- Open a bank account — to hold all that moolah
- Get worker’s compensation insurance — Unless you waive the need, see below.
- Choose a payroll services company — Because we didn’t want to mess with quarterly filings and other S-Corp tax requirements. It’s not our core competency and others agree with that mentality. If you can do it, do it.
- Get an accountant — Because we didn’t want to again fumble through our taxes, particularly now that we were closing a partnership and opening a new corporation
- Get a credit card to start earning business credit — So you can buy that big warehouse space someday!
Resources I used and lessons I learned:
- Pennsylvania Open for Business
- Reach out to your local government business groups — Call the City of Philadelphia Revenue Department and the Pennsylvania Commerce Department or your local answer to those two — Opening businesses are damn good for government, so they tend to be pretty helpful. I didn’t find (much) bureaucracy in this process.
- How do I choose a payroll services company for my business
- How to get a business credit card
- How to open a business in the City of Philadelphia — Also an overview here
- Worker’s Compensation Insurance: Find out whether you need it-and how to get it — Pennsylvania option here
- In Pennsylvania, if all employees have at least five percent ownership, you can waive the need to have worker’s compensation insurance.
- Pennsylvania Tax Guide — Simple About.com post, but it answered (sorta) a couple questions I had about our choosing to tax ourselves.