Should You Incorporate Now or in 2012?

It’s almost time to turn the page on 2011. But before you start thinking about your New Year’s resolutions, it’s a good time to take stock of various odds and ends that should be completed while it’s still 2011.


Perhaps you have been considering incorporating or forming an LLC for your business, but you haven’t yet made the time in your daily calendar or maybe you just aren’t sure when is the best time to do so.

There’s a simple answer to when to incorporate, and that’s right now. After all, the sooner you incorporate or form an LLC, the sooner you can start reaping the rewards of your business structure – whether that’s potential tax savings or lowering your personal liability.

But, as in all tax and legal matters related to your business, the answer isn’t always so simple. There are other considerations that can influence the optimal timing for your business structure.

Your incorporation date isn’t retroactive

Your corporation’s “start date” is not retroactive. Your new legal structure and any tax benefits you might receive apply from the date you incorporated. This typically means filing two business income tax returns for the year. For example, if your corporation was formed on December 15, you’ll need to file as a sole proprietor (or whatever your previous entity may have been) from January 1 to December 15 and then file as a corporation from December 15 to December 31.

To ease the paperwork burden, many small business owners look to incorporate on the most logical start date of all…January 1. For this reason, January is the absolute busiest time of the month for your state’s Secretary of State office, and you’ll be at the mercy of any backlog. It’s not uncommon for it to take up to 40 to 60 business days to bring a corporation or LLC into existence after submitting your filing documents to the state office. And as state offices grapple with budget shortfalls and employee cuts, wait times will only get longer.

Consider a delayed filing

There’s an interesting option that can fast-track your application to the front of the line come January. Provided by an online legal document filing service, a “Delayed Filing” lets you complete your paperwork and submit your application with a document filing service now, and then delay your actual incorporation date until the new year.

A delayed filing is a great option, as you can effectively choose the date of incorporation or LLC formation. And by getting your paperwork in now, you can cross one more thing off your list, and avoid having to file multiple business income tax statements and an annual report for 2011.

Of course, a delayed filing is not for everyone. If you fall into any of the following categories, you should look to incorporate sooner, rather than later:

  • You’re a consultant or other professional who needs to form a corporation in order to be awarded a particular job.
  • The tax benefits associated with incorporating are so significant that it makes no sense to wait (and your tax advisor has advised you to incorporate now).
  • You feel you need the legal protection of your own personal assets from any liability owed by the company–sooner rather than later.

But for those of you who see no pressing need to fast track your incorporation or LLC formation, consider the delayed filing option and ask your document filing service about this feature. You can get your paperwork completed right away, select your preferred effective date, and be ready to start fresh with your business in 2012.

Incorporate Photo via Shutterstock

CorpNet offers business formations, filings, state tax registrations, and corporate compliance services in all 50 states. Express and 24 hour rush filing services available upon request. Click here to learn more.

Nellie Akalp Nellie Akalp is a passionate entrepreneur, recognized business expert and mother of four. She is the CEO of CorpNet, the smartest way to start a business, register for payroll taxes, and maintain business compliance across the United States.