Incorporating a startup business provides a number of benefits to entrepreneurs–primarily protection of their personal assets from the debts and liabilities of the business. However, there are a range of steps to be completed to incorporate the business and most of them involve charges or fees.
This article offers a summary of the costs involved in starting a business from scratch and any other fees related to associated actions.
1. The filing fee for incorporation is due to the Secretary of State
Corporations are established pursuant to state law. the “Articles of Incorporation” or “Certificate of Incorporation” must be filed with the Secretary of State in order to formalize the company. Filing fees vary according to state. For California the filing fee payable to Secretary of State amounts to $100. For Delaware, the fee is $89. If you would like the filing process to be expedited Additional charges are to be paid.
2. Fees for incorporation services
There are several incorporation companies that can manage the filing and paperwork required to create your company including ZenBusiness, LegalZoom, MyCorporation, and CorpNet. They offer a variety of plans that range from $200 to $1000 with no filing fees paid to the State. The fees usually cover the creation of resolutions of director’s board members, charter documents, as well as the bylaws.
3. Attorney’s costs
In the case of more complex incorporations involving investors, founders or other specific contractual or intellectual property issues, it would make sense to employ an expert startup lawyer. They typically be charged hourly and typically range from $250-$600 per hour. Some law firms may offer a “fixed fee” for basic services like preparing the charter as well as other corporate documents. Professional startup lawyers can assist you to avoid mistakes that are often made by new businesses.
4. Fees for registered agents
If your company is created the company must be registered with an ” registered agent,” or the “agent for service of process.” The registered agent is an individual or business entity that has been authorized to conduct business in the state where you were incorporated. The registered agent is the person who receives official legal and tax correspondence for the company. The registered agent could be an employee of the business or a shareholder, director, a person who lives in the state, or a registered agent service organization.
A majority of the online incorporation companies (ZenBusiness, CorpNet, MyCorporation etc.).) offer registered agent services for an annual cost of between $100-$300, associated with their incorporation service. Utilizing the services of an external registered agent will ensure your privacy since the registered agent’s address is recorded in public records and not your actual address.
5. Tax ID fee (none)
In the majority of cases it is necessary to obtain a tax ID through the IRS for your business. It’s also known by the name of an “Employer Identification Number” (EIN) It’s like an Social Security number, but specifically for business. Banks will require an EIN when you establish accounts for a business bank account, and also to file tax returns. You can obtain an EIN on the internet on the IRS website. There is no charge for getting an EIN at the IRS.
6. Minimum Franchise Tax
Some states require the franchise tax at a minimum on corporate entities (although some states will not charge it until the first year of a company). The state of California there is a minimum franchise fee per year that is $800.
7. DBA fee for filing
If you intend to run your business under a name other than the name that is registered by the Secretary of State it is necessary to obtain an “DBA” or “doing business as” certificate. The cost is usually low between $25 and $50. It’s a once-off fee.
8. Permits, licenses or registration cost
In accordance with the type of company, you might need to obtain the following licenses, permits or other regulations. These will increase the cost of incorporating a new business:
- Permits are required for businesses that are regulated (aviation and marijuana dispensaries, agriculture bars, etc.)
- License or permit for sales tax
- Home-based businesses are permitted
- Business permits for counties and cities or licenses
- Zoning permit
- Seller’s license
- The Health department can issue permits (such as those for restaurants)
- Employer IDs and tax IDs from the federal and state government.
Also, visit also the CalGold web site that assists California businesses to find the right permit information and contact details for the different California agencies that manage the permits. Based on the type of business you operate it may require licenses or permits that are required on the federal level , too. Go to the SBA website here to learn more about federal licenses and permits. The cost for each of these differ based on the type of license or permit as well as the state of the applicant.
9. Annually, you file with the Secretary of State
Certain states, including California which require an initial, and later annual company filing that contains the basic details of the company (address and name of the officers and registered agents and so on.). In California it is referred to as”a “Statement of Information” and the fee for filing for companies is $25.
10. Stock sales exemption filing
If you offer shares in your company, you’re required to register under the federal Securities laws of the state. However, many startups are eligible to be exempt from these registration requirements. However, the state could have to submit with the state an application for exemption, and then pay of between $25 and $50.
Other expenses of inscribing an initial
Although they are not necessarily incorporation costs startup companies must include and plan for other regular operating expenses like taxes as well as accounting, insurance bookkeeping, software employees, contractors and other services suppliers.
