Limited liability company (LLC) is a business structure that provides a business with limited liability (similar to a corporation), but the structure is easier to establish and simpler to maintain.There are many services like a northwest registered agent, Nolo,
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Have you been thinking about starting a business or incorporating a business or existing sole ownership?If so, you might be wondering what is the best time to incorporate or make an LLC. Should you try to incorporate or form it in before the end of the year or wait until next year?
Below are three tips for determining when is the best time to incorporate or form your business:
- If you have liability concerns, incorporate or formright away
If your business is involved in a trade or activities with a lot of liability, then you should incorporate or form an LLC as soon as possible in order to separate your personal finances from your business.In this case, there’s no reason to wait and no need to disclose yourself to anymore liability.
- If you will gain significant tax benefits from incorporating, do it as soon as possible
If your tax counselor has told you that you can significantly lower your taxes by incorporating, you will want to get your incorporation paperwork in as quickly as possible.
Of course, keep in mind that your corporation’s ‘start date’ is not retroactive. Any tax advantages you might receive from incorporating begin on the date you incorporate. This means you will generally have to file two business income tax returns for the year:
- First, for the months that you operated as a sole owner (or whatever your previous body may have been).
- Second, another tax filing for the months after you incorporated.
- If you are looking to simplify your paperwork, incorporate on January 1st
For small business owners that do not have significant liability concerns, 1st January is the most logical start date since it eases the paperwork burden. Additionally, you do not have to worry about reporting taxes as two different bodies during the year.
Because of this, January is the most engaging time of the year of processing incorporation applications at many Secretary of State offices. In some cases, it can take up to 40-60 days to bring a Corporation or LLC into presence after you submit your filing documents with the state office.
If you are using a document filing service, you can also look into something called a “delayed filing” that lets you complete your paperwork now and then delay your real incorporation date until next year. This lets you effectively select the date of incorporation and your application will be fast-tracked to the front of the line in January.
If you have urgent need to incorporate or form an LLC (i.e. you have liability concerns or will get significant tax benefits), then you should form your business body as soon as possible.
However, if there is not a specific necessity, look to incorporate in January and give your business a fresh start in the new year.