Years ago, when I left my day job in pursuit of working from home full time, I didn’t want to place all my eggs in one basket. I wanted to have a safety net, something to fall back on in case the contract job I was pursing didn’t work out. So I decided to start a business. My problem – I had no idea what in the heck my business was going to do and I had no money whatsoever to get it up and running.
I started researching online and decided I wanted to form a corporation, to protect myself personally and to start things off on the right foot. Ideally, you’d have really good business idea, a complex business plan, and either a lot of money to invest or a handful of investors. I didn’t have any of that but I was still hell-bent on forming a corporation. So I did.
While I wouldn’t recommend starting a business the way I did, putting the horse before the cart, I can definitley tell you that incorporating your business is possible and even desirable.
First of all, let me remind you that telecommuting really involves two different types of situations. When you work at home for a company you’re doing so either as an employee, or as a contract worker. If you’re an employee, you certainly don’t have any need for incorporating yourself to continue doing the job you’re doing. But if you’re a remote contract worker, you are technically self-employed and can certainly look into forming a company that provides the services you provide.
How do you know if you’re an employee vs a contract worker? Easy, by the documentation you receive at the end of each year. Do you get a W-2 from the company you work for? Then you’re an employee. Do you get a 1099 form? Then you’re a contract worker.
If you own your own business you may or may not (technically) be telecommuting – it depends on what you’re doing. If you’re a hair dresser and you build a shop right next to your house you’re not really telecommuting. You’re still going to work, you’ve just got a tiny commute. But if you own your own business and you’re a contract worker employed by several different companies, I’d say you are still telecommuting . . . you’re not driving to those places to do the work, you’re performing the work remotely.
But I’m splitting hairs, and getting off track! So, back to incorporating a business. Let’s say you’re interested in either transitioning from a contract worker to owning a company that is then contracted to do the work. Or let’s say that you’re already knitting and selling baby blankets, or sewing Halloween costumes for several kids in your area, or cleaning a few houses to help make ends meet and you think you could develop your product or service into a really profitable company. Or let’s say you have a really good idea for something that you know would work, and you want to get the ball rolling on forming a corporation right off the bat.
If you decide that you want a corporation and the benefits that go along with it, then pursue making your business it’s own separate entity. It’s not as difficult as you might think to incorporate. It really boils down to these most basic steps, though each of the steps require a lot of little steps along the way. The actual little steps depend on the particulars of your business and the state in which you’re incorporating it.
- Sketching a business plan
- Determining what kind of company structure you’ll be setting up
- Brainstorming & researching a name
- Forms and other paperwork
- Maintaining minutes and records
Decide what it is you’re going to sell or do. Are you going to sell hand-made baby blankets online? Are you going to clean houses and apartments? Are you going to offer secretarial services to local businesses who could use administrative help but don’t have the need for a full time secretary? Think about what you want to do and start to really define it. Keep a notebook with you all the time and jot down anything you think of. Where do you see yourself and your business in five years?
For me, it was a corporation (an S-Corp to be exact). But it’s not the same for all – so do your research to determine whether you want to set up a Sole Proprietorship, a Partnership, a Corporation, an LLC, etc. The best resource for that is the SBA.gov – Choose A Structure page.
This is the fun part! It’s much easier to brainstorm company names when you know what you’re going to offer. I had no idea what I was going to sell, but I knew I was going to sell something online. I liked working online, knew just enough about .html to get a website up and running, and had found a free host. Back then I even had a free ISP. Anyone else remember those days?
I had a good time thinking up possible names and didn’t worry so much about what I was going to be doing with the company down the road. I just wanted a nice enough name that it didn’t make me yawn. Sure, it’s easier to brainstorm names when you know what you’re going to do, but not all company and brand names tout the product or service they’re selling. Old Navy doesn’t really sell anything old and it certainly has nothing to do with sailors. How did Old Navy choose it’s name?
By chance, really. Millard “Mickey” Drexler, CEO of Gap Inc. (Old Navy’s parent), began wrestling three years ago with the cultural problem afflicting the fashion business: it had become hip not to spend money on clothes. He converted 48 underperforming Gap stores into down-market outlets and called them Gap Warehouse. Wanting a name with a bit more imagination, Drexler hired an outside firm to work up some other possibilities. The top two suggestions came back: Forklift and Monorail. He hated them. Then on a trip to Paris he and some executives were walking around the city and came upon a building with the words “Old Navy” written on the side. “We just thought, ‘That’s a great name for a business,’ ” recalls Drexler. “And it just stuck.”
-WILL OLD NAVY FILL THE GAP?
Once you have a list of names you like, notice I said a LIST of names, you’ll need to start researching to be sure you’re not infringing on another company. It’s your responsibility to do that and it’s meticulously boring. If you hire out any part of incorporating your business, hire out this research. I definitely would have if I could have afforded it (especially if I was going to be selling a proprietary product or service that I felt needed to be trademarked).
If you’re doing the research yourself, or at least some preliminary research yourself, you’ll need to start with your County Clerk’s office and your Secretary of State’s office. Some of them allow you to search their databases right online. Look for a “corporations database” or something similar. But some of them may require you to get in the car and spend some time in the building. If you are forming your corporation in a different state (like popular Delaware and Nevada for example), then I assume you’ll need to search that state’s database as well. There are some good reasons to do that – to incorporate your business in Delaware or Nevada – but that’s a whole other topic for a whole other day.
Another free resource you’ll want to take advantage of is the United States Patent and Trademark Office. Then there’s always Google and Yahoo search engines. And don’t forget about business listing websites and the yellow pages.
If you have money to invest – have an attorney or a legal research firm do an additional search for your company name to ensure you won’t hit a snag somewhere down the line. And if you have a bunch of money to invest, hire someone to design a professional logo that doesn’t infringe on anyone else’s intellectual property. Come up with a slogan for your business, and you’ll be ahead of the game.
With the really hard part already under your belt, you’re ready to fill out forms and jumping through your state’s requirement hoops. You’ll find all of the information you need at your state’s Secretary of State office website. To find yours, check the NASS list (National Association of Secretaries of State).
Some of the things you can expect to be doing include creating your Articles of Incorporation, setting up a corporate minute book, and naming your share holders. You may also be asked to obtain various licenses and permits depending on what your business entails.
Once you send everything in (with every “t” crossed and every “i” dotted), you follow whatever additional rules your state has for finishing up and maintaining records.
This is perhaps the biggest, most important step of incorporating your business. Know, up front, that once it’s created you have to maintain it. It might be easy to keep corporate minutes when you have a board of directors but when you own your own, you still have to keep corporate minutes. My own are few and far between but anytime something happens, a formal minutes entry is actually made into the book. I also maintain annual reports – but can do that right online as well via the Secretary of State website.
Helpful Online Resources:
In your quest to incorporate your business – these will be invaluable resources:
Business.gov’s Business Incorporation page
Update: Business.USA.gov’s Programs and services for starting your business
U.S. Small Business Administration – Small Business Planner
Update: SBA.gov’s Starting a Business
- Your Secretary of State’s website probably has a corporate division and probably offers a lot of valuable information as well. So be sure to check that out, too.
Update note: The resources above have been revised over the years and the original links are now dead. Evidently when you’re a dotGOV it’s not important to include 301 redirects as part of your website redesign plans.
If you want to hire someone to help you incorporate your business, look to a trusted lawyer or to online services with a Better Business Bureau listing. You’ll also find some valuable resources and guides at these websites (if you’re doing the work yourself):
- CorpNet Incorporation Services
- The Company Corporation – Incorporating & LLC Formation
- BizFilings LLC & Incorporating a Business
- DirectIncorporation’s Free Corporate Name Search
Note: I have not personally used any of these services, and cannot vouch for them. I found them by searching the Internet and while they appear to be reputable, please be sure to do your own research before working with them to help you incorporate your business. Search the Better Business Bureau and search engines to learn as much as you can and make an informed decision!