Costs to Be Aware of When Incorporating a Start-Up
Doing Business As
The launch of a business start-up can be an exciting process, and many entrepreneurs jump on the chance to incorporate it as well. There are a number of reasons why incorporating a start-up can benefit the business owner. However, the challenges and costs involved with incorporating a start-up are important to recognize. The first step to managing these costs is to know about them in advance. Here are costs to recognize and understand if you are considering incorporating your start-up.
Secretary of State Filing Fee
Since most corporations are required to be formed under state law, businesses must complete two documents. These are the Articles of Incorporation and Certification of Incorporation. Both of these documents must be filed with the Secretary of State in your state to reaffirm the organization of the corporation. The fees can vary according to each state, so look up your state’s fees once you reach this stage of the incorporation process.
Service Fees from Incorporation Companies
Many businesses go the route of using a service company to help guide them with the incorporation process. These include ZenBusiness, MyCorporation, LegalZoom, and more. It is important to recognize the costs involved with using these companies. Research these services using their websites, as each of them may have a different range of services with equally varied pricing plans for their clients. In addition, the fees can be broken down further depending on the level of services. These services include the preparation of resolutions, charter documents, and more.
If you are working with an attorney on incorporating your business, it is important to know their costs as well. An experienced lawyer typically charges by the hour with fees ranging from $250 to $600 per hour depending on the level of service. Other law firms may provide a fixed fee for services covering the basic parts of incorporation. These include charter preparation and forming other corporate documents.
Incorporating a business requires a registered agent during the process. This is the person or entity who has the authorization to conduct business in the state of incorporation, and who also handles the legal and tax processes on behalf of your organization. Business personnel who can be classified as registered agents include chief executives, shareholders, directors, or another stakeholder who resides in the same state as the one the business is incorporating in. Some third-party services also offer registered agent fees. These fees range from $100 to $300 depending on the extent of the services. It is recommended that you use a registered agent for added security during your incorporation process, so check with the specific company on their rates for this service as you proceed.
DBA Filing Fee
If the incorporation process involves having the business operate under a different name than the officially filed one, a DBA (doing business as) certificate must be filed. This process involves one of the smaller fees, usually within a range of $25 to $50. In addition, this is a one-time fee so you don’t have to consider recurrent payments even after the incorporation process has been completed.
Permit or Registration Fees
Some types of businesses may require additional permits or licenses to operate. These can also be included in the cost of the incorporation process. Some of the most common types of businesses that may require permits include:
- Marijuana Dispensaries
- Med Spas
If you believe your business may fall into similar categories, look at potential permit requirements in your operating area. Different fees may be expected depending on the type of permit and the location you are doing business in, so make sure to check local government websites and resources as well.
If you are in California, CalGold can be particularly helpful. This website acts as a resource for California-based businesses to find the most relevant permit information. In addition, they can help with the registration process. Other limits may be expected on the federal level, so be sure to check the SBA (Small Business Administration) website for any information applicable to federal permits and licenses.
Stock Sale Exemptions
When you’re issuing stock in your business, federal and state agencies may also have additional registration requirements. If you are a start-up, you can also check if you are eligible for an exemption from the stock sale registration requirements. Some states may have a small fee to process an exemption request. These can range from $25 to $50. When you work with your state to secure an exemption, ask them if they have a fee for this request as well.
Many start-ups look to incorporation as the next step in their growth phase. There are many nuances to getting fully incorporated as a business that can come with different costs. By recognizing your costs ahead of time, you can better prepare for a smooth incorporation process. As you look at your incorporation options within your state, look up the aforementioned costs and learn them as well.
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