When looking at your end-of-year checklist, you may be questioning whether or not now is a good time to incorporate your business. It’s actually a great time to do so, especially if you want to start a new year fresh as a corporation.
Benefits to Incorporating Before the End of the Year
Incorporating now means that you start the new year as a new business structure. You may have operated as a sole proprietor previously, but you’ll start out with a corporation or LLC in the new year.
This makes your taxes a lot easier to deal with. When you incorporate mid-year, you have to file two tax forms the following year:
- one under your social security for the portion of the year you were a sole proprietor;
- one under your employer identification number.
Who likes doing taxes twice? Filing now keeps that from happening.
Also, some states require that corporations and LLCs pay a franchise tax fee. California, for example, requires corporations to pay $800 or a percent of net income (whichever is greater).
But you won’t have to pay it for this year if you don’t do any business in the state in the last 15 days of the year, and your tax year was 15 days or less. Here’s to saving money!
The Delayed Filing Option
This is a fantastic option to ensure that your corporate business structure is ready to roll at the start of a new year. You file your application for a corporation or LLC now and delay the incorporation date until the new year.
So if, for whatever reason, you want your corporation to start on Jan. 17 (maybe that’s your business’ anniversary), you have control over that date.
As long as your paperwork looks good, you’ll be set to go live with your new business structure on the date you set.
So What are You Waiting For?
It will take you some time to gather any necessary paperwork or information, so don’t delay in starting the process for your corporation or LLC. You can opt to expedite your application so that you’re eligible for the delayed filing option at the start of the year.
There are a lot of people filing right now, so you want to make sure that your application gets that stamp of approval as soon as possible.
Thinking Photo via Shutterstock
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so I guess the taxes is enough of a motivation to incorporate at this time of the year. It can be quite a trouble to sort out in other parts of the year anyway.