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Structure your firm wisely
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August 11, 2000: 1:14 p.m. ET
Decide whether to incorporate company as a C or an S corporation, or at all
By Jane Applegate
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NEW YORK (CNNfn) - Dear Jane: I am looking to incorporate my business. I am not sure whether to incorporate as a C corporation or an S corporation or just to operate as a sole proprietor. I am the sole owner of the company and run most of the operations from my office.
Most small companies start out as sole proprietorships because that is the simplest and cheapest way of setting up a new business. You merely need to file a "doing business as" or "DBA" form with your local county clerk and publish notice of the filing in a newspaper for several weeks.
Once you've filed your DBA, the next step is to open a business bank account and begin serving your customers and clients. Be sure to buy a software program that allows you to keep track of all your money and generate invoices.
Incorporating makes sense if you are planning to hire employees or accept outside investment capital. All forms of incorporation provide protection from liability, which means if someone sues you, they are really suing your company and your personal assets are protected.
A "C" corporation is usually more costly to set up, (the filing fees depend on what state you incorporate your business in), but offers the most flexibility. A "subchapter S" corporation (named for the section of the tax code that covers it) provides basic protections as well as tax rates similar to those paid by individuals.
I would recommend speaking with a good small business attorney to make sure you are doing the right thing.
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