Why Should You Incorporate?
There are many benefits to becoming an entity. An agency can select from a C Corporation, S Corporation, or Limited Liability Company. Most incorporation takes place in Delaware, Nevada, or the company’s home state. Corporations can offer stock options to its employees which serves as additional incentive. This is especially important for startups since stock options offset lower wages (most of the time). LLCs are better for smaller agencies who are more focused on the agency side and obtaining monthly invoices.
Before deciding what type of corporation to register you should understand whether you would want investors. If you are interested in pursuing investors, a corporation makes senses. Corporations generally have an easier time raising money because they can issue equity easier. The main difference between a C and S Corporations are tax considerations.
Traditionally sophisticated investors prefer multiple rounds of funding. The Delaware C Corporation is the best structure for that.
For a closely held company where there are a limited number of investors a LLC or S Corporation is probably the structure you want.
Incorporation pitfalls include: timing and sequencing, the wrong structure, no documentation, and partner issues.