Matt, I think Rich and Robert are right. You make it sound worse than it is. Take a step back and resolve one issue after another and you’ll find that some questions and issues will start clearing up just by pursuing a sequential approach.
First you will need to decide what organizational structure is most suitable for you. This is usually determined by the nature of your business, whether or not you work with partners, expected risk exposure, potential need for outside financing, etc.
The most popular structures are C-Corps and LLCs; but there are of course others. The big difference between a C-Corp and LLC is that the C-Corp is a separate tax entity while the LLC is a so-called flow-through entity. This is an important distinction because if you’re operating as a C-Corp, you’ll face “double taxation”. This is due to the profits of the Corp being subject to corporate income tax and then any dividends or financial gains that are allocated to shareholders are again subject to personal income taxes. I know it sounds crazy but the C-Corp is widely preferred among potential equity investors because it tends to afford management and shareholders a stronger corporate veil than other corporate structures.
The LLC on the other hand is a very simple corporate structure that affords the management and members/shareholders limited liability without imposing double-taxation. A good way to look at this is that if the LLC generated a profit of $10,000 and you happen to own 50% of the company, your personal and taxable income will automatically increase by $5,000.
Forming a C-Corp or LLC is a rather simple and straightforward process in most states and can usually be handled without professional help. Legalzoom is certainly a great starting point, but you would be amazed how helpful most states and even the IRS are when it comes to fostering entrepreneurship. Most state websites offer the required forms for download or point you to wizard-like online filing options. Cost for incorporating both entities are either slight below or above $100 depending on what state you file. Both entities also require that you have a designated registered agent, which you can be yourself if you reside in the same state as your business. It really isn’t complicated at all.
After you filed your “articles of incorporation” or “articles of organization” with the state, you can move on to applying for a Federal Employer Identification Number (FEIN) with the IRS. The IRS, just like most states makes this process very easy by providing an online and fax application process. In most cases, you’ll be able to get a temporary FEIN on the spot, which is later replaced by your permanent FEIN, which will arrive in the mail.
That’s about it.
Well, if you work with partners, the process is slightly more complex as you need to determine what corporate structure is most suitable for them. In all likelihood, it will boil down to either a C-Corp or LLC. You would also be well advised to draft and execute a shareholder or partnership agreement, just to make sure everybody is on the same page.
The state where you incorporated will automatically notify the state’s department of revenue, which will usually introduce itself by sending a tax manual and corresponding forms in the mail.
If you still think the task at hand is overwhelming or your case differs from the basic scenario I described above, please feel free to send me a PM and we can help you with that.
I hope this helps.
Advanced Document Design for entrepreneurs, intermediaries, and the financial services industry.