Becoming incorporated? Few quick questions, S-Corp fine, etc?

I figure a lot of you are probably independent contractors so I have a couple quick OT questions…

I currently work full-time in a company as W2 employee, but will be picking up side contract work. I’d like to become incorporated to avoid 1099 implications and to have some basic liability asset protection.

I see that you can file to register to become incorporated online.

  1. There seems to be numerous sites that allow you to apply for becoming incorporated. Are any better than others? is there something to look out for when doing it online that could be a ‘gotcha’ that screws me?

  2. Is just setting up the most basic S-Corp fine (I don’t plan to have employees or plan to be doing a lot of work out of state.) The first google hit for applying shows some of the packages Is the basic $99 package fine? (Does it protect me enough from someone taking my house if they tried to sue?)

  3. Approximately how long does it take for everything to go through? I’d like to start doing work for someone in a couple of weeks and of course would want the checks paid out to my company name I come up with. (Worse case, I’ll have him pay me at a later date rather than weekly until the name gets registered. I’m just hoping this doesn’t take a long time to process.)

Thanks for any advice.

You might consider joining the Rails Business list where this is on

In fact you might find some answers in the archives of that group,
since it's come up several times.

I think forming an LLC, or Incorporated business is great. However, talk to a lawyer/attourney if you can, because a single member LLC or a single stakeholder Inc will NOT necessarily protect you from the liabilities you’re looking to protect yourself from. The misconception most people have is that the incorporation (rather than obtaining sole proprietor licenses) is enough to shield themselves from legal action from passing through to their personal assets, but with single-owner LLC/Inc’s, many judges will still pass through judgements to claims on personal assets if you do not follow all the rules around LLCs and corporations, such as quarterly and/or yearly meetings with minutes, state filings, etc.

Spend the extra time to research your decision thoroughly. It’s a lot of work for a one-person company, and it may not make sense for everyone. But, if you’ve determined that it actually is, congrats!


First, I agree with both Kevin and Rick when they suggest that you talk to a lawyer about this. You’re going to spend more than $99, but a few hundred now is better than getting screwed later. The rules that apply to an LLC vary by state so you can’t rely too much on any advice you get from a mailing lise.

Second, you need to be very aware of what kind of employment agreement you have with your W-2 employer. Some agreements effectively make any work you do the intellectual property of the employer. That could put you in a bad situation if you do something cool (aka, financially attractive) for a client.


Rob Biedenharn

Hmm, that’s a very good point I never thought of.