Are Online Incorporation Tools a Legitimate and Reliable Way to Create a Corporation?

Online incorporation tools can lead to serious legal problems down the road.

Online incorporation toolsThe upbeat advertisements of online incorporation tools make incorporating your company look very cheap, easy, and simple. But unfortunately, that’s far from the truth. Purchasing a kit online to incorporate a business without the help of a professional can be like buying all the parts to build a car without the knowledge of how it goes together. If you don’t know what you are doing, you may wind up with a business disaster.

Will Online Incorporation Tools Save Me Money?

Will setting up a corporation using online tools save you lot of money in fees? Yes and no. Those tools may save you some money in the beginning. However, your lack of knowledge and the incomplete incorporation plan you receive from an Internet company can cost you heavily in the future if a legal problem occurs.

Seek Professional Knowledge

If you have no idea of how to set up a corporation or only superficial knowledge of how it works, you should seek advice from a licensed tax professional. Such an expert will educate you on what to expect from your decision to incorporate, as well as detailing your responsibilities for your business entity.

Speaking with a tax professional will also help you decide if incorporating your business is the right option to pursue at this point. Incorporating a business has many valuable benefits, such as protection of personal assets, but it has some disadvantages of which you should be aware. Here are a few that have long-reaching tax implications:

  • Incorporation can cause “double” taxation because all profits from the business are subject to tax as a corporation and again as an individual tax.
  • The corporation’s finances must be completely separate from the business owner’s personal finances. Any money held in a financial institution’s for the corporation is off-limits for personal purposes.

You’re Getting Only the Bare Bones

Online tools can help you in the initial stage of setting up the bare bones of a corporation within your state, but it doesn’t accomplish all the required legal tasks. Some other relevant legal requirements include:

  • The creation of your company’s bylaws
  • Plans or agreements to buy or sell your company in the future
  • Registration of any securities for your company
  • The creation of your company’s minutes

They Can’t Break the Law

When you purchase online incorporation tools for your company, you will receive blank forms to fill out and instructions on where to file them. The online incorporation services can’t go any further with this process because that would be breaking the law. They can’t file the paperwork for you or provide further assistance because they aren’t your legal representatives. So, they are only providing the paperwork for sale and nothing else.

Incorporation Tools Create Future Problems

Never rely on online incorporation tools if a company consists of several partners. With no legal documentation of ownership, there’s no clear way to divide the company’s assets or split the proceeds between the partners if the company goes up for sale. This scenario could result in an expensive court case to decide the financial outcome. A licensed tax professional will be able to help multiple business partners legally document important decisions. Finally, this process should happen before the incorporation of the company to avoid future litigation.

You Won’t Have Full Protection

If you use online incorporation tools, you won’t have full legal protections. This could eventually lead to litigation and expensive legal settlements. It’s a much better plan to form your corporation under the expert guidance of a licensed tax professional. An expert will make sure you are well-informed and will help you handle all legal and tax matters. Don’t risk your future!

Categories: CORPORATIONS & LLCs.