Yes, you can incorporate a business yourself. You can also cut your own hair. The question is whether you should.
Incorporating a business online looks simple enough. Pick a name, answer a few questions, pay the filing fee and congratulations—you now own a Corporation.
Unfortunately, creating a corporation and properly structuring one are two different things.
We work closely with CPAs, and lately we have seen an increase in the number of clients being referred to us because they incorporated themselves and their Articles of Incorporation do not work for what they are now trying to do. Usually, the issue comes up when the accountant is attempting to complete certain tax planning and discovers that the share structure does not allow it.
The incorporation was cheap. The repair bill will not be.
Many online incorporations authorize only one class of common shares. That may be fine when the business is new and has one owner. It becomes a problem when the owner later wants to add a spouse, child, employee or investor, pay different dividends to different shareholders, retain voting control, complete an estate freeze or plan for a future sale.
Fixing the problem may require Articles of Amendment, corporate resolutions, share exchanges, updates to the minute book and additional work by both the lawyer and accountant. The client ends up paying twice: once to incorporate and again to fix the incorporation.
Articles of Incorporation are not simply forms to be filed and forgotten. When we prepare Articles, we look at what the business needs now and what it may need later. Are other shareholders likely to be added? Could family members become involved? Will the owner want flexibility in paying dividends? Is tax or succession planning likely down the road?
Not every Corporation needs a complicated share structure. The goal is not to make things more complex than necessary, but to ensure the Corporation can accommodate the owner’s plans. Building in the right flexibility at the outset is generally much easier—and less expensive—than changing the structure later.
An online service can file the Articles you select. It cannot tell you whether those Articles make sense for your business or where you plan to take it.
So, yes, you can incorporate yourself. Just remember: clicking “submit” is the easy part. Paying us to fix what you submitted may be more difficult in the long run.
Robin K. Mann, Associate Lawyer