Google Answers Logo
View Question
Q: filing incorporation paperwork for a business ( Answered 5 out of 5 stars,   1 Comment )
Subject: filing incorporation paperwork for a business
Category: Business and Money > Small Businesses
Asked by: g8z-ga
List Price: $10.00
Posted: 19 Sep 2003 19:52 PDT
Expires: 19 Oct 2003 19:52 PDT
Question ID: 258424

I would like to know if it is better to go to an established company,
like bizfile, that will file incorporation papers on your behalf, or
is it better to file the paperwork yourself using some
commercially-available software product?

If you recommend doing it yourself using a commercial software
package, what software products exist that might assist me in filing
incorporation papers? What are some drawbacks to doing it this way, or
some advantages, etc.?


Request for Question Clarification by denco-ga on 19 Sep 2003 21:04 PDT
Howdy Jen,

If you could provide researchers with the type of corporation
(LLC, etc.) you are considering, and the state in which you are
incorporating, that might help in answering your question.

Thanks!  denco-ga

Clarification of Question by g8z-ga on 19 Sep 2003 21:40 PDT
Hi denco-ga,

Thanks for looking at my question. The type of corporation is an
S-corporation, and the state is California. I would also like to know
if there are any consequences for incorporating in Nevada if the
primary business takes place in California.


Clarification of Question by g8z-ga on 20 Sep 2003 00:15 PDT
hi Researchers!

I raised the price of this question a bit in the hope that someone
might be willing to provide an answer soon... I'm really desperate for
some guidance. :)

Pretty please?? Thanks!
Subject: Re: filing incorporation paperwork for a business
Answered By: weisstho-ga on 21 Sep 2003 11:45 PDT
Rated:5 out of 5 stars
Hello to you, Jen.  I have been reluctant to take your question since
the options that you were interested in were probably not on my radar
screen. If you don’t mind the opinions of a Michigan attorney that
specializes in business law, I will be glad to try to be a help. And,
you did say “pretty please”!!!!!

First, let’s look at why we incorporate, and by “incorporate” I mean
why we form some type of limited liability organization, such as a
corporation, a limited liability company, a limited partnership, or
other entity. Principally, the question is why we form a corporation
or a limited liability company (LLC).

Although there may be tax ramifications motivating our decision to
incorporate, the primary reason, far and away, is to limit liability
to the owners of the entity. A corporation/LLC, you see, is a separate
person under the law. It can’t get married to a human, and it can’t
vote for public office, but it can do most other things that a natural
person can do – it can own property, it can contract, it can sue and
be sued, and it can vote in most non-political elections (such as
shareholder meetings).

Black’s Law Dictionary defines a “corporation” as “an entity (usually
a business) having authority under law to act as a single person
distinct from the shareholders who own it and having rights to issue
stock and exist indefinitely; a group or succession of persons
established in accordance with legal rules into a legal or juristic
person that has legal personality distinct from the natural persons
who make it up, exists indefinitely apart from them, and has legal
powers that its constitution [its Bylaws] gives it. Black’s 7th ed. at

In California, according to the excellent California Secretary of
State web site (see its “business portal” and pass through - a
“limited liability company” consists of one or more members which may
be individuals, partnerships, limited partnerships, trusts, estates,
associations, corporations, other limited liability companies or other
business entities. The members of a limited liability company are
afforded limited liability similar to shareholders of a corporation
and have pass-through taxes comparable to a partnership. .

“Limited Liability” – that’s what it’s all about. If the
shareholder(s)/members or managers operate the entity properly – keep
books separate from the owners, maintain separate bank accounts and
records, in short, treat the company like the separate person that it
truly is, then that “person” distinction is protected. If sued, the
plaintiff (person bringing the law suit) may only sue the business
entity, and not the individual shareholders.  DISCLAIMER:  The reason
law students spend three years of their lives in law school is to
learn how to get around this rule thereby enabling them to sue
everybody in sight!

Example – you win the California Lottery and buy a beautiful new
Mercedes CLK500 Cabriolet in Mocha Black Metallic wrapped around Stone
Napa Leather Upholstery (see
) [it’s good to dream] – AND you decide to incorporate your business
and you file the papers and deposit $10,000 into your new corporate
bank account. You instantly sell your first product, which, since you
have used up all your good luck, instantly injures the purchaser by
having its faux gold finish of this widget rub off onto someone who is
allergic to faux gold finish, injuring him. He sues. For $100,000,000
and the jury believes him (old lawyer bromide – never trust your fate
to twelve people not smart enough to get out of jury duty.)  Well, he
can now attach your $10,000 bank account – BUT HE CAN’T GET AT YOUR
MERCEDES, since that is a personal asset, and not an asset of that
other person – your corporation.

“Limited Liability” – it bears repeating – that’s what it’s all about.

Otherwise, why incorporate. It costs money. It is one more
administrative nightmare that you have to manage. Why do it, other
than to get the cool business cards that say “Jen, President and CEO”.
If the limited liability weren’t so important, you would remain a
sole-proprietor or partnership and remain personally liable with that
gorgeous CLK500 available to your business creditors.

SO, we incorporate or form an LLC. 

The act of granting corporation status (Inc., Corp., Corporation,
Incorporated, etc.) or limited liability company status (L.L.C.) is
strictly a function of the California Secretary of State. .  Their outstanding web site has complete
directions for do-it-yourselfers: .

And there are companies that will do it, and how-to-kits available on
CD – and bookkeepers that will do it, and dog-catchers that will do
it. There are a lot of resources out there – no question. And some of
them are pretty darn good.

But what if they slip. What if they make a mistake in the filing. What
if their choice of entity (corp or LLC, say) is NOT the best for your
particular and peculiar situation. Have you lost the very protection
that you were seeking to obtain?  There is simply too much at risk to
not have it done professionally by someone who spends their time
dealing with it – your friendly neighborhood attorney-at-law. Not the
accountant. The attorney.

Now, just yesterday, I answered a question about what do you put down
on the form to incorporate for the person to receive “service of
process” in California.  You may want to look at that answer – it ties
in to your question.  See .

Here is another wonderful resource for you, if you haven’t been there.
It is from the United States Small Business Administration:

You asked about Nevada in your clarification.  I wouldn’t.
California’s tax gurus are going to tax you on your California income,
regardless of the state of incorporation. There are many good and
great reasons to incorporate in other states (Delaware is VERY
popular) – but those choices are best left, in my opinion, to more
mature companies and to companies that operate across state lines with
large dollar amounts at stake.

If you were to take your California corporation and open an office in
another state – say open a branch in Las Vegas, then a whole series of
other questions come into play – registering the California
corporation in Nevada as a “foreign corporation”, or incorporating a
Nevada subsidiary or some other affiliated company (maybe there is a
Jen California, Inc. AND a Jen Nevada, Inc.). Serious legal and tax
questions arise.

In my opinion, Jen, the best way to protect yourself and your company
is to find a good business attorney and a good tax person and sit down
with them together – talk about your plan and find out from them,
together, what your best course of action is. It may cost $1000, but
you will find, I am absolutely positive, the experience to be a
bargain and invaluable. Make it clear that money is a consideration –
get a fixed price for a consult and business filing in advance.

Talk to friends and colleagues for recommendations. Ask the attorney
and CPA if they have experience in your field. Ask the professionals
that you know (dentists, doctors, accountants, other business owners)
for recommendations.

There is a place for the services that you mentioned, services like
Bizfile, etc. They are excellent at processing paperwork through some
of the mazes that exist out there, particularly for interstate filings
and out-of-state filings. They serve many useful and great services,
but, in my professional opinion, your needs will best be served by
legal and tax counsel of your choosing.

BTW – and I think you know this, but just in case. A “Sub-S”
corporation is just another corporation as far as California is
concerned. The “Subchapter S” status is given to a corporation that
has certain specific attributes by the IRS which allows for
“flow-through taxation” which is to say that the business profits (and
certain losses) flow through to the shareholder’s tax return.

Good Luck, Jen. Although I took a different approach, I really feel
that it is an approach worthy of consideration.

I imagine you will need clarification. I will check back often. 

And thanks for visiting us. 


Search Strategy:

Small Business Administration:

California Secretary of State: 

Request for Answer Clarification by g8z-ga on 21 Sep 2003 14:03 PDT
Thanks so much for your advice, Weisstho.  I found it to be very
thorough and amusing all at the same time.

I'm actually an accountant working on my CPA license.  I'm trying to
help out friends of mine (husband and wife) who are starting up a
party entertainment business.  My background at this point is limited,
so I was seeking the resources of others.

In fact, what they intend to do with the business gets more
complicated than just the incorporation.  The reason why I am
recommending an s-election and not an LLC is for tax reasons.  First
of all, their business will leave the participants at risk of
physically injury, so liability protection is an absolute must. 
Secondly, in anticipation of this business making a lot of money
within 1-2 years if marketed well, I would like to help them avoid
having their flow through income be taxed as self-employment income. 
I can guide them on how to take salaries from the company so they do
not avoid paying FICA/medicare tax entirely, but it will be a
deduction to the company in that manner and not an additional tax to
them personally.

Here's where it gets sticky and where I leave them to consult away
with a business attorney.  They intend to take the business on the
road to spring break hot spots, like FL, Nevada, and Mexico.  I know
nothing about the requirements or costs for foreign corporations, let
alone international law.  I have done a bit of research, but I
obviously couldn't possibly give them adequate advice.

Because you argue so well regarding the benefits of hiring a lawyer
even at the start-up stage of the game, I will advise them to find one
and will put out a few feelers myself.  Surely, they will be better
off than stumbling around in the dark or taking insufficient advice
from a newbie accountant.

Thanks again,


Clarification of Answer by weisstho-ga on 21 Sep 2003 15:19 PDT
Hi, again, Jen!

First of all:  CONGRATS on getting going with the CPA thing. That is
indeed very hard work and it looks like it is beginning to pay off!

You were hitting the nail on the head as to the flow-through taxation
issues. That is why, in part, I like to sit-down with a CPA and the
client at the beginning. There are differences between Corps and LLCs
- as you correctly point out. A very common misconception is that
flow-through is flow-through and Sub-S's and LLC's achieve exactly the
same result.

Your client's plan on taking his/her product on the road is sticky -
very sticky. Let's see:  Out-of-state company + college kids + booze +
party atmosphere.  Nope, no liability there!  (just kiddin')

The greater the exposure to liability, the greater effort is required
to shield their personal assets from that liability. For example,
would having any single-purpose entities be a good idea?  Have assets
in one entity, and lease them to another?  Can be tricky "corporate
veil" stuff - depending on their net-worth and assets - may be an

As to registering in other jurisdictions. Depends wholly upon the
state. I can't opine on that question for you Westerners. The forum
state (i.e. Nevada) will have laws and civil procedures that will be
at issue. Probably plan, though, on any litigation being of a Tort
(rather than a Contract claim) - for a primer on Torts see this
Canadian thing: .  Generally,
the venue for most Tort injury cases tends to be in the state and
location where the injury occurs. But this can vary, and there are
ways of manipulating that issue (forum selection clauses, etc.)

Definitely needs the attorney.

Thanks again, Jen, for visiting. 

g8z-ga rated this answer:5 out of 5 stars
Thanks for the great answer!

Subject: Re: filing incorporation paperwork for a business
From: atr-ga on 20 Sep 2003 07:54 PDT
Use a professional if you are the forgetful type who might miss
the various deadlines for annual paperwork etc. If you have the
extra time to organize and be dilligent, do it yourself.

Important Disclaimer: Answers and comments provided on Google Answers are general information, and are not intended to substitute for informed professional medical, psychiatric, psychological, tax, legal, investment, accounting, or other professional advice. Google does not endorse, and expressly disclaims liability for any product, manufacturer, distributor, service or service provider mentioned or any opinion expressed in answers or comments. Please read carefully the Google Answers Terms of Service.

If you feel that you have found inappropriate content, please let us know by emailing us at with the question ID listed above. Thank you.
Search Google Answers for
Google Answers  

Google Home - Answers FAQ - Terms of Service - Privacy Policy