The process of incorporating a business is governed primarily by state law. State laws vary from one jurisdiction to the next, but certain core elements are common to all states. Likewise, many aspects of incorporation are treated the same under federal tax law regardless of the state in which you incorporate. These nuances should be considered when you set up your online advertising website or any other business.
Determine the state in which you will incorporate your online advertising business. Because your company will conduct business online, your state of incorporation might not be as obvious as it would for a business tied to a physical address. Most companies incorporate in the state where their principal offices are located. But if your company will be doing business in every state, your options may include states such as Delaware that offer distinct tax advantages. Choosing the right state may require some diligent research and planning on your part.
Choose a corporate tax structure that will serve your needs. You can organize as a C corporation or an S corporation. Both limit the liability of shareholders for corporate debts and are otherwise treated as distinct legal entities for all but tax purposes. One key difference is that C corporations are taxed as separate entities and pay corporate taxes, while S corporations are “pass-through” entities whose profits and losses are reported on shareholders’ personal tax returns. Refer to “Starting a Business,” a free IRS publication, for assistance in determining which corporate tax structure is right for you.
Prepare and sign your articles of incorporation. This organizing document defines your corporation. The requirements of what must be included in the articles vary, depending on the state in which you incorporate. In most states, the Secretary of State's office will advise you of the minimal requirements and provide forms for preparing your articles. Generally, your articles must include the name of your corporation; the purpose for which the business is being incorporated; the name and address of the corporation's registered agent within that state; the names and addresses of the initial incorporators; and the classes of stock and number of shares in each class that the corporation is authorized to issue.
File your articles of incorporation with the Secretary of State in the state where you are incorporating and pay the applicable filing fees.
Prepare and file IRS Form 2553 signed by all shareholders if you are electing to have your business taxed as an S corporation.