When entrepreneurs contemplate incorporating their startups, they may take a pause when they see the initial costs, especially if their budget is a thin one. It’s easy to spend more than $1,000 on attorney and filing fees just to get a corporation or LLC up and running, but there are several surefire ways you can cut costs. Below, you’ll find seven ways to save when you incorporate your startup. Take a look:
1. Pick a cheap state
All states are not equal when it comes to filing fees. Some states charge much more to form your corporation or LLC, so if your business is web-based, or you have no storefront, you may want to initially incorporate your corporation or form your LLC in a different state. Idaho, Wyoming, Colorado, New Mexico, and Indiana are some of the cheapest states in which you can form your business entity.
2. Don’t expedite the filing
Unless you want to incorporate your company in Alabama (if you don’t expedite your forms here, you’ll wait about six months for your business entity to be formed), don’t pay to have the filing expedited. In some cases, this will save you more than $100. The average wait time to hear back from a state without paying to expedite the filing is close to three weeks.
3. File online
In many states, it’s not only faster to file your articles of incorporation online, it’s also less expensive. However, not all states have online filing options. Check the filing fees and options with the secretary of state (or your state’s equivalent) to find what options are available to you and your business.
4. Don’t use a registered agent service
Although third-party registered agents do offer plenty of helpful services, your company may be able to do without one. Your business cannot be listed as its own registered agent, but any individual that can accept mail during normal business hours and has a physical residence in the state where you form your company can be designated as the registered agent.
5. Form the company on your own
You don’t need to pay someone to form your company. The filing forms can be somewhat complicated, but with a little research, anyone should be able to manage forming their own LLC or corporation. Also, states that offer online filing options tend to offer uncomplicated filings.
6. Get the EIN yourself
All business entities need an Employer Identification Number (EIN/FEIN) — it’s like a business’ social security number. Some companies offer this service for a fee, but if you have the patience to fill out the IRS’ form (Form SS-4) and wait on hold for a few minutes to talk to an IRS representative, it’s a straightforward process to obtain an EIN. The IRS also offers a simplified online filing process
7. Don’t pay for private legal forms
For your company or corporation to be complete, it will need to adopt bylaws or an operating agreement, depending upon which type of business entity you’ve formed. Instead of paying an attorney to draft these legal documents, you can find free, general bylaws or operating agreement to adopt online. What you want to be cautious of is whether these free documents will suit your business. Read through what you find online and make sure you understand the bylaws or operating agreement; otherwise, if you don’t understand what you’re reading, these governing documents will be of little use to you or your business. Of course, your company can amend these documents at a later date to accommodate the evolution of your business, but you’ll want to make sure the bylaws or operating agreement will be able to help guide your business right from the start.