Let’s say I wanted to legally form a company that did absolutely nothing. The company doesn’t buy anything, sell anything, perform any business at all, and I’m its sole “employee”. Suppose this is in Delaware.
How much would it cost per year just to legally be a business?
There are lots of ways to organize a “business”. You can just be self-employed. You can create a sole proprietorship. You can create a partnership. You can create a corporation and be the sole owner of the corporation.
If you just want to print up business cards that say “Bob’s Consulting”, but not actually engage in any business, then that’s all you need to do.
If you want to create a corporation, then see here: Here are 7 Steps to help you Start a Corporation | Nolo
Will you have an office? Thats the big issue. Lease payment, power, internet, basic business licence fees (in my hood thats like $28/year) IRS is only doing to accept deductions for so long if you do not generate a profit though (3 out of 5 years I think). We also have county property taxes on businesses (like $40/year in my case).
If you incorporate there will be additional fees. Assuming you are paying yourself, all the appropriate payroll taxes have to be paid.
In my case, costs about $3K a month to keep the lights on and the doors open.
In California, there is a small fee IIRC for filing as a DBA plus the newspaper notices. The DBA status needs to be renewed every year.
The fee for a business license is usually calculated on a sliding scale based on profits or expected profits. Or was that revenue? Let’s see.
The flat portion is $24.* The lowest license tax is nine-tenths of one (1) mill for each dollar of gross receipts. Types of businesses in that category include: Transporting Persons, Notary, Massage, Typing, Gardening, Janitorial Services, Piano Lessons, etc. Having the equipment or a location for some of these triggers an additional tax. But if you’re not doing anything, that wouldn’t apply.
So the minimum would be $24. I’d round it up to $25, in case someone argues that you can’t be a business without any receipts at all.
We just formed an S-Corp for my gf’s law firm. It cost 128$ to file with the state. She had to file with the IRS to, but that was free.
(I think the IRS frowns on corporations that don’t do anything though, since some people use it as a form of tax evasion. So I wouldn’t suggest forming a company and trying to write off a bunch of stuff as “business expenses” as I’ve known some people to do)
I do business as an S-Corporation. I think the stuff I have to pay that’s unrelated to actually doing business would be a couple hundred to the state each year to register as a corporation in that state, a few hundred to an attorney to conduct the annual shareholders’ meeting (for both of us shareholders) and be on retainer for general legal questions, and a bit over a thousand to an accountant to do our annual taxes and answer questions during the year.
If you aren’t actually incorporated you can call yourself a company for nothing.
I had “corporation” in the OP but took it out as I wasn’t sure if I could be a one-man, do-nothing corporation. The reason I ask is because I’m considering opening a certain business (95% sure it’d be a corporation), but it might take a few years to actually get any revenue going. I’m wondering what money I’d have at risk if I worked out of my home office with just my internet connection, MS Word, and a deskjet printer. I’d pay myself nothing, rent nothing, and sell nothing for at least a year, probably two.
So far, it seems we have estimates from $24 to $1,000. Can we narrow that down a bit? I doubt I’d need a shareholder’s meeting or an accountant if I’m not selling shares and my books are blank.
ETA: Separately, my wife mused about opening a thrift store last night. She wasn’t being serious, as the negatives were way too many for it to be realistic, but I’m curious about it anyway.
The business will probably need its own bank account and tax filing even if it did nothing. Also you may run into zoning laws prohibiting you running a business at your residence, requiring you to at least rent a post office box for its address. And it might need liability insurance.
Go to your state’s Secretary of State website. A lot of your questions should be answered there.
I’ve done some research about forming a corporation. One thing that a lot of books stress is the importance of going through all the formalities, even though it might seem to be a waste of time for a one-person corporation. This includes things like issuing stock, adopting bylaws, appointing a board of directors, etc.
If you don’t do those things, and for some reason somebody eventually sues you, the court may conclude that your corporation is a sham, set up simply to shield yourself from liability. This is called “piercing the corporate veil,” and it opens you up for personal liability for something that you did in your business name.
If you incorporate, you can then get an Employer Identification Number from the IRS, which in some cases may make it easier to deduct (legitimate) business expenses.
Don’t incorporate until you actually have income then. If you incorporate most (all?) states require you to have a shareholders’ meeting even if all you do at that meeting is sign a paper saying you had the meeting to send to the state. If you incorporate, even if you don’t have income you have to file a tax return and pay your yearly registration fee to the state.
If you don’t incorporate none of this applies so your low estimate should be $0. Just make sure if you do earn any income you declare it and any expenses you want to deduct on your personal tax return on schedule C under “self-employed income.”
We can narrow it down to $0. Very few places require any kind of registration until you either start making money or are actively offering a product/service.
The expenses you’re describing are called “start-up costs.” For tax purposes, track your start-up costs by the type of expense and they’ll be capitalized under IRC Sec 195 once the company starts operation, in whatever form. You might also refer to Publication 535 for a more user-friendly explanation.
Pretty much any adult citizen can get one. Not sure about non-citizens.
Even if your incorperated most of those aren’t really necessary costs for a business that “does nothing”, are they? If your the sole share-holder there isn’t much point in hiring an attorney to conduct a shareholder meeting, you presumably won’t have any legal questions and your taxes should be simple enough to fill out yourself.
It looks like the cost of registering a corporation in Deleware is something like 150$. I think that’s it as far as costs that someone has to pay. If your business starts actually doing things it makes sense to hire someone for help with taxes and pay for legal advice, but that wasn’t the OP’s question.