Have you ever wondered how to turn your business into a legally recognized entity? Incorporating your business opens the doors to financial security, tax benefits, and credibility. With millions of businesses filing each year, making sense of the incorporation process can be overwhelming.
In this article, keep reading to help you incorporate your business seamlessly, prepare for tax filing in 2025, and understand how choosing the right structure impacts your financial future.
What Does It Mean to Incorporate Your Business?
What is incorporation and why does it matter in 2025?
Incorporation is the legal formation of a corporate entity—it gives your business legal status separate from you, the owner. That matters in 2025 because the IRS treats corporations differently than individuals, especially when it comes to business income, deducting business expenses, and filing corporate tax. Most importantly, you gain liability protection, meaning your debt or lawsuits against the business won’t put your personal assets at risk.
How does incorporation differ from an LLC or sole proprietorship?
Here's what you need to know before you choose a business structure:
- Sole Proprietorships: No legal separation. You're personally on the hook for everything. You report everything on your individual tax return.
- LLC (Limited Liability Company): Combines liability protection with pass-through taxation. You still report income on your personal tax return, but your risk is limited.
- C Corporation (C Corp): Separate legal and tax entity. It pays corporate income tax, and you pay individual tax on dividends—this is double taxation, but a C corp offers the most growth potential and options like issuing shares.
How Do You Incorporate Your Business Step by Step?
What are the first legal steps to take?
If you want to incorporate, here's how to start:
- Check if your business name is available
Search your state’s corporation database and the U.S. Patent and Trademark Office to avoid conflicts. - Register with your Secretary of State
This is where most corporations are subject to filing requirements. Use the SBA's tool to find what you need to file in your state. Costs and requirements may vary based on your type of business and state.
How do you file Articles of Incorporation?
You’ll file Articles of Incorporation (also called a Certificate of Incorporation) with the Secretary of State. Include:
- Business name
- Business address
- Your registered agent
- Purpose of your business or list of products or services
- Directors and officers
- Number of shares you plan to issue
Fees usually run from $50 to $300. Once accepted, your corporation is official. You may also need to file permits or articles of organization, depending on your location.
What about corporate bylaws and a board of directors?
Yes, you’ll need bylaws—they define how business decisions are made, how shares are handled, and what happens during ownership or management changes. Some states may require them even if you don’t plan to issue shares right away.
You must also appoint a board of directors. In most states, it’s usually the Secretary of State who confirms your filing. Directors help allocate income to owners, make major decisions, and ensure the company complies with legal and tax obligations.
Where Should You Incorporate Your Business?
What factors should influence your choice of state?
When choosing where to form your corporation, don’t just look at startup fees—look at corporate tax rates, filing rules, and ongoing costs.
- Delaware: Popular for larger businesses because of flexible corporate level law and courts
- Wyoming and Nevada: Low or no corporate income tax, minimal reporting
Each state treats LLCs, C corporations, and partnerships differently when it comes to taxes and compliance. If you plan to conduct business outside your home state, you’ll have to file as a foreign entity and get a local registered agent.
Do you need to register in multiple states?
Yes—if you:
- Operate in multiple states or have remote workers
- Hold regular client meetings in other states
- Earn substantial revenue in another jurisdiction
You’ll also have to file annual reports, maintain a registered agent, and possibly obtain a permit or local license.
How Does Incorporation Affect Your Taxes in 2025?
What are the tax differences between C-corps, S-corps, and B-corps?
- C Corporation: Pays a flat corporate tax rate of 21% (as of 2025). Income is taxed at the corporate level, and again as dividends on your personal tax returns—that’s the double taxation downside.
- S Corporation: No corporate income tax. Income is passed through to shareholders, reported on their individual tax returns. You may deduct normal business expenses and up to 20% of business income under IRS Section 199A.
- B Corporation: Still taxed like a C corp, but must also submit social-impact reports. Good option if your mission is part of your brand.
What taxes do corporations need to file in 2025?
- Estimated Income Tax: Use Form 1120-W. Pay quarterly to avoid IRS penalties.
- Annual Return:
- C corps: File Form 1120
- S corps: File Form 1120S
- Employment Taxes:
- Form 941 (quarterly): Withholding, Social Security, Medicare
- Form 940 (yearly): Federal unemployment
- Excise Taxes: File Form 720 if you sell certain goods or services
To keep the IRS happy and protect your corporation’s legitimacy, keep solid records, track business expenses, and file on time. If you're unsure, don't guess—get professional tax advice.
Key Takeaways
- Incorporating protects your personal assets and separates you legally from your business.
- C corps pay corporate tax and face double taxation; S corps offer pass-through taxation and possible 20% income deduction.
- You must file Articles of Incorporation with your state and appoint a registered agent and board of directors.
- Choose your state of incorporation wisely—taxes and filing rules vary by state.
- Corporations are required to file annual returns, pay estimated taxes, and comply with federal and state regulations.
How can Taxfyle help?
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At Taxfyle, we connect you with licensed, experienced CPAs or EAs in the US. We handle the hard part of finding the right tax professional by matching you with a Pro who has the right experience to meet your unique needs and will file your file taxes for you.
