Every professional man and woman should incorporate themself. Yes…even if you are an employee at a company.
Let’s say Sally works for So&So Corporation as an Administrative Assistant. As an individual who is employed by So&So, she is getting paid (and taxed) as an individual. Say Sally establishes her DBA (Doing Business As) called Sally’s Assisting. She then approaches her employer about getting paid as a DBA rather than as an individual. Employers are obligated to pay employees the way employees direct them.
Ultimately, even if Sally does not want to start her own business in the traditional sense, establishing herself as a business in the eyes of the government has financial benefits. Note: There are a couple ways to incorporate yourself, but we are going to refer to the process of establishing a DBA (Doing Business As). Do your research to find the path most effective for you. There are many benefits to incorporating, and getting paid through a DBA. The price to pay is a one time $20-30 fee, and a mandatory renewal every 5 years. But, doing business as a DBA means the paycheck Sally gets from So&So is bigger than when she was paid as an individual. As an employee of a company, you get a paycheck. Your employer automatically takes out taxes from your gross pay. But as a DBA, those taxes are your responsibility to calculate and pay at the end of the year, and as a DBA, Sally gets the most allowable business deductions available.
This means, a good chunk of her expenses count as business deductions come tax-season. Including but not limited to: auto expenses, books and legal and professional fees, insurance, travel, equipment, charitable contributions, taxes, education expenses, advertising and promotion, office supplies, business gifts, and even part of her mortgage if she works work from home. Depending on the type of business established, in specific circumstances, expenses for clothing and makeup can count as a business expense. For example, if you’re a YouTuber or Influencer whose job requires you to be on camera.
This means all of those expenses deduct the amount in taxes Sally will owe at the end of the year. By establishing a DBA, it’s like she has gotten an incredible raise without changing anything except for how she interacts with the state.
Starting your own business (DBA) sounds intimidating. The process, however, is straightforward to do yourself.
How to Incorporate Yourself
1) Find a Name
The first step is making sure your business’s name is available. All U.S. states have an online database where you can find out if your proposed name is already in use.
This search option can be found on your secretary of state’s website (or the website for the corresponding agency tasked with forming businesses in your state).
Type into Google: “Secretary of State business name search (NAME OF YOUR STATE)”
Step 2: File a Fictitious Business Name Statement
- This is also at your county clerk’s office. The forms and fees vary by county. You might be able to print the form from the county clerk’s website, but some counties require business owners to pick up hard copies of the form at the office. The form must be filed in the county where the main business office is located for your company. In most counties, the filing fee for registering will be between $20 and $30.
- The document asks for: your original name and address, your DBA name, your business address, the full legal names of registered owners, your state business ID number, and your business type.
Step 3: Publish Your Fictitious Business Name Statement
California requires that you publish a fictitious name statement within 30 days of registering your DBA. The statement must appear in a newspaper of general circulation in the county where you are registering and appear at least once a week for four consecutive weeks. This sounds complicated, but your county clerk’s office will provide you will all the info you need. Most counties maintain a list of qualifying local newspapers on their website.
Within 30 days of fulfilling the publication requirement, you must file an affidavit of publication with the county to verify that you have satisfied the publication requirement. Again, this sounds more complicated than it is; your county’s clerk office will provide you will all the information you need. Find an example of an affidavit here.
Step 4: Set up Business Bank Account
Okay, so now that you’ve become an official business in the eyes of the government, it’s time to set up a Business Bank Account so you can get the most out of your DBA.
In order to keep your personal income and the business separate, you need to have a business bank account. Separation of funds is incredibly important so that come tax-season, business and personal expenses can be easily identified.