If you’re wondering about incorporating a business, you are not alone. Incorporation is one of the many things on the mind of almost every new business owner.

Business owners often wonder when is the best time to incorporate. Incorporation is generally done early on – it’s usually one of the top items on the “starting a business” checklist. Incorporating early gives a business a more established footing when starting out and helps you enjoy the benefits of incorporation to a greater extent in the early phases of building your business.

Incorporating also gives you a more established image when dealing with customers or competing for business.

When people say “incorporating a business,” they usually mean forming an LLC, C Corporation or S Corporation (although technically an LLC is “formed,” not incorporated). Incorporating involves properly completing your documents, naming your business' registered agent, and properly filing with the state. Depending on the state and type of business form you choose, you may also need an operating agreement, organizational meeting, bylaws or S Corp election. For more detailed information, see How to Incorporate a Business.

The traditional reason for incorporating a business is to help protect your individual and family’s wealth. In today’s litigious society, it is unfortunately all too easy for a business to be exposed to risks. Running your business as an LLC, S Corporation or C Corporation (instead of as an individual sole proprietor) provides great strides in protecting your other hard-earned assets as you grow the business. This is a primary reason why incorporating is at the top of the checklist.

Another reason for incorporating is that running your business as an official entity makes it easier to obtain financing or funding should the need ever arise. Banks and other lenders are more likely to loan money to incorporated businesses than to unincorporated businesses or individuals. Incorporating gives your business the credibility it needs to grow and expand.