How does a person become an incorporated business here in Alabama?

UPDATED: Oct 1, 2022

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How does a person become an incorporated business here in Alabama?

I am relocating from Florida to Alabama. I work from home for an answering
service out of Tampa Fl. In order to keep working I have to become an independant
contractor. I need help to set this up. What does it entail and what is the
approx cost?

Asked on October 23, 2018 under Business Law, Alabama


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

1) You simply file in a state (your state, AL, is as good as any) to create a corporation or limited liability company (LLC), then use the registation you get from the state to request a EIN (Employer Identification Number; a/k/a tax ID #) from the IRS. You can do all of this online. Just google "incorporate Alabama" and look for the government website; then google "IRS EIN" and look for the IRS's website.
2) Cost--varies by state, but $250 - $500 is a good estimate.
3) Taxes--we will assumme you create either an LLC (and that when you do, you select what will be called "disregarded" or "pass through" or "partnership" tax treatment) or an S-corporation (not a C-corporation), since those are best for independent contractors. If you do that, the income (or losses--i.e. if you end up spending more on the business than you take in, such as on buying new computer or phone equipment, printers, lights, office furniture, etc. to set up a home office, the surplus of costs over income becomes a business "loss" that gives you a tax deduction) "passes through" or "disregards" the business structure and goes right to your bottom line and is taxed with any other income (from any side or second job, or rental income if you rent out part of your home, etc.) you make. The business has no detrimental effect on your taxes and does not increase your taxes. In fact--and discuss this with a tax preparer or accountant--it may facilitate you deducting certain expenses as business expenses.
4) Whether to set up an LLC or a S-corp.: there really is almost nothing to chose between with these two structures for an independent contractor's purpses, except that an LLC involves a bit less paperwork and formalities; therefore, for an indepdent contrator, the LLC is probably better, or at least more convenient.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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