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Incorporation For Freelancers


It\'s VERY important that Freelancers,Contractors,or Consultants incorporate their companies.

It\'s VERY important that Freelancers,Contractors,or Consultants incorporate their companies.

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  • 1. Incorporation for Freelancers
    National Academy for Television Arts and Sciences
    June 25, 2008
  • 2. Agenda
    Introduction to USA Corporate Services
    What is Incorporation
    Why would you want to consider incorporation
    Different options for setting up the business
    How do you do it
  • 3. Introduction
    USA Corporate Services Inc.
    We are a leading professional service provider for incorporate and post-incorporation services to domestic and international clients
    25 years of experience helping lawyers, accountants and entrepreneurs
    Offices in New York and Albany
    John P. GordonCompany founder, CEO & Chairman
    Columbia & London Business School MBAs
  • 4. What is Incorporation?
    “Incorporation (abbreviated Inc. in U.S. and Canadian business names) is the forming of a new corporation (a corporation being a legal entity that is effectively recognised as a person, albeit a fictitious one, under the law).”
    Realistically, it’s the process of filing a new corporation or LLC with a state filing officer as a step in the creation of a new business, or as part of an asset protection strategy.
  • 5. Why would a freelancer want to incorporate?
    Benefits to freelancer
    Ability to own, develop and sell a trademarked business name
    Easier to get long-term freelance assignments (see benefits to employer)
    Tax benefits – enhanced deductibility of many benefits
    Benefits are specific to which entity type, and tax status
    Legal benefits
    Can build up a business that can be sold, can pass along to next generation
    Limited liability
    Benefits to employer
    No 1099
    Stops IRS inquiries into ‘statutory employee status’
    Ability to contract with a corporation
    No worries about payroll overhead
  • 6. Here is what you need to consider when you start up your own Company
    The Idea
    Planning Stage
    Compliance Stage
    • Organizational mtg
    • 14. Federal & State tax filings /registrations
    • 15. Bank account
    • 16. Licenses & permits
    • 17. Business insurance
    • 18. Leases, Hiring, Marketing
    Begin doing business
  • 19. Choosing your Entity – Preliminary Questions
    What level of commitment do you want?
    How serious is this business?
    Glorified hobby? Testing the waters?
    How many people?
    Employees? Partners? Investors?
    How many locations?
    One office? Multiple Locations? Multiple States/Countries?
    How much capital is involved? Are you looking for funding?
    Investors like commitment!
    What’s the exit strategy?
    How easy is it to value your business? What exactly are you selling?
    Entities come in different shapes and sizes, your choice should be determined by your needs.
  • 20. Types of Entities
    Sole proprietorship – not an entity but a right to use a name not your own.
    Partnership – a group of trusting people
    Joint and several liability
    Limited Partnership – where investors are not so trusting of management
    Business Corporation – Legal Separation of investment from management
    S corp v C corp: taxation and ownership differences
    LLC – limited liability company. Ultimate in flexibility
  • 21. Incorporated/Unincorporated Entities
    Business Corporations are “incorporated entities” (owners can’t just take money out for themselves)
    LLCs are “unincorporated entities” (owners can distribute earnings to its owners as allowed in the Operating Agreement
    Both Entities have:
    Perpetual existence (live until they are killed off)
    Limited liability (pay their own bills)
    Ability to sue and be sued on their own
    Free transferability of ownership
    Worldwide recognition of their existence
  • 22. Business Corporations
    Chief Officers
    Traditional Corporation Structure
    The standard business entity in the US for over 100 years
    Corporations are owned by shareholders, governed by directors and run by officers
    For simplicity, one person can be shareholder, director and officer
    Law requires a simple annual meeting that what, if anything, was done in the last year
  • 23. S Corp (alias Sub-S) v. C Corp
    S Corp
    Pass-through taxation:
    Profits and losses mostly go directly to the shareholders
    Restricted ownership:
    Less than 100 shareholders*
    No non-US residents
    All natural persons or “qualified trusts”
    Only one class of shares allowed*
    Owner-managers subject to special rules (can’t just avoid payroll taxes by taking out only profits)
    C Corp
    Pays its own taxes, profits can only be transferred out by non-deductible dividends
    Completely unrestricted ownership of shares
    Allowed a far wider range of deductible benefits
  • 24. Limited Liability Company (LLC)
    Most recent major type of business entity
    Based on partnership law, not corporate law, and therefore more flexible
    Can choose how to be taxed, and can change that designation
    Members can run the company – very simple to administer
    Most states don’t require an annual meeting
  • 25. Where to Incorporate
    Entities are governed by the laws of the state of incorporation. Therefore, state of incorporation may be important to your company’s future. If you incorporate out of state, then you will have to maintain a registered office out of state and register your business to do business in your own state. You will be responsible for state corporate taxes (if any) whether you are a foreign company or domestic.
    The main decision is between the state you are located in, or Delaware.
    If you are setting up a small business within one state, just incorporate there.
    If you think that your company will be expanding out of your state, or you will soon be involved with venture capitalists, incorporate in Delaware.
  • 26. How to Incorporate
    3 Options:
    Do it yourself
    Call your lawyer or accountant
    Use an incorporating company
    Time value of money
    Do it yourself – climbing the learning curve
    Download corporate forms
    Fill them in and submit them with choices of name
    Order corporate outfit
    Get tax number
    Hold organizational meeting and adopt bylaws
    Call your lawyer or accountant:
    Lawyers are more expensive, but should be providing you with guidance, and understand your situation
    Accountants can help you decide what is best for your finances and tax situation – a good accountant will help you get the maximum value out of your company
    Use an incorporating company
    Check them carefully for misleading pricing
    How good are they at providing you with useful advice
    They cannot give you legal or accounting advice
  • 27. Post-Incorporation Steps
    Post-incorporation paperwork
    Federal tax number
    Open bank account
    Corporate minutes, bylaws or operating agreement
    Corporate Niceties
    Bookkeeping for freelancers
    Tax withholding -> Payroll service
    Accounting for a business
    Annual meetings for corporations
  • 28. Thank You!
    Thanks for your participation! To learn more about how to take advantage of incorporating, contact us at (800)891-7432, or check out our website at
    Or contact me directly at