LegalZoom works with Bank of America to help our customers open business checking accounts. The registered agent is the contact person listed for your corporation. They will receive service of process notices, government correspondence, and compliance-related documents on behalf of your corporation. Often referred to as the firm’s bylaws, a corporate bylaw is a formal legal document defining the most significant rules and procedures that govern how an organization conducts business daily. Once incorporators agree on the state in which to incorporate, they apply for a corporate charter. A corporate charter is a contract between the state and the incorporators, and their successors, granting the corporation its legal existence.
In addition to these formalities being eliminated, the laws usually streamline some of the other meeting and voting requirements. The intent is to relieve some of the administrative burdens to the small corporation owner. If a close corporation appeals to you, consult an attorney in the state you are incorporating in to determine if a close corporation statute exists. If you’d like to file yourself, you’ll find the documents you need on your state’s Secretary of State website, and possibly at the physical location of the filing agency office.
To form a corporation in the U.S., it is necessary to file articles of incorporation with the state in which it will be registered. Usually, incorporation is immediately followed by the issuance of stock to the corporation’s shareholders. After this point, in an annual meeting, the shareholders will elect a board of directors. The bylaws may make provisions for special committees of the board, defining their membership and the scope of their activities. They set up the machinery for the transfer of shares, the maintenance of share records, and for the declaration and payment of dividends. However, they can be very helpful and are viewed by some as necessary.
Depending on the state you’re doing business in and your corporation type, the taxation your corporation could face will vary. For the most up-to-date information about the taxation of corporations, you can visit the IRS website. Bylaws are written rules that determine how your corporation will be governed. Whether it’s to save money on taxes, attract investors, protect yourself, or boost reputability, starting a corporation might be the best next step for you and the business. On the upside, the three biggest advantages of becoming a corporation are limited liability, business continuity, and access to funding. A nonprofit designation is typically reserved for companies benefiting the public or working to effect a specific cause.
If you want to do business under a name that is different from the corporate name you’ve chosen, you may need to register a fictitious name. This allows you to keep the identity of your corporation separate from your business name. An important first step when starting a corporation is selecting a business name. In most states, you’ll need to include a corporate designation or a word that identifies your business as a corporation. Below are some basic details about each of these types of corporations.
Double taxation may be partially or completely avoided in a small business by paying a salary to the employee shareholder. However, the tax laws governing this area are complex and should be discussed with your accountant or your attorney. However, corporations must register as “foreign” corporations in any states in which they do business, outside of the state in which they were organized. And specific steps must be followed, including the selection of a registered agent. Both organization and foreign registration entail the payment of initial and annual fees which can add up to substantial amounts of money over time.
Steps to forming a corporation
Registration takes time and typically involves extra legal and accounting fees. Bylaws are the internal rules that govern the day-to-day operations of a corporation. Typically, the bylaws are adopted by the corporation’s directors at their first board meeting. For single-owner corporations, the sole owner simply prepares, signs, and files the articles of incorporation themselves. For co-owned corporations, the owners can either all sign the articles or appoint one person to sign them.
The number of authorized shares is stated in the company’s articles of incorporation. When incorporating in Georgia, you must publish a notice of intent to incorporate in a newspaper in the county where your office will be located. Corporations that are C-corps in most states face a more cumbersome and costly incorporation process than those that are S-corps. According to the IRS, an S corporation can have a maximum of 100 shareholders. A C-corporation may issue stock certificates to the general public and accept unlimited shareholders.
LLC vs. inc.: Which is better for your business?
For example, a loan made to or from the corporation should be evidenced by a corporate resolution. If the name is already in use by another corporation, the incorporation documents will be rejected. Save time and effort by determining whether the proposed corporate name is available before filing the incorporation documents. Peter has taught contemporary business planning—from concept to execution—for many years in venues including Lane Community College, University of Oregon, Oregon SBDC, and Oregon SCORE. He has also mentored individual local youth and local small businesses.
If you are working with a lawyer, you should get their feedback on the name you choose. If not, you can send a name availability inquiry letter to your state’s Secretary of State office yourself. Once you are confident that your name is unique and acceptable, you’re ready to file it as part of the incorporation papers.
Corporation: What It Is and How to Form One
The shareholders are required to elect the board of directors in an annual meeting. This is a business structure where the business is a separate entity from the individuals that run the business. Because the company is a separate entity, the shareholders enjoy limited liability. This means that they generally can’t be held individually liable for the corporation’s responsibilities, such as business debts, taxes, liabilities and other obligations. A corporation is a formal institution independent from its shareholders and separate from its business.
- Issuing stock to the shareholders is one of the first formal corporate actions after forming a corporation.
- In addition, the corporation may use normal short-term financing, such as accounts receivable financing and inventory financing.
- If you feel there are a couple hundred dollars of value to getting help, go for it, and know that thousands of people make the same choice every month.
- Limited liability is an essential characteristic of a corporation since it protects owners from being held personally liable for the business’s liabilities.
- One of the most popular is the corporation, also known as the C Corp.
The corporation does not get a tax deduction when it distributes dividends to shareholders. Jane Haskins practiced law for 20 years, representing small businesses in startup, dissolution, business transactions and litigation. She has written hundreds of articles on legal, intellectual property and tax issues affecting small businesses. If you are the sole shareholder, you can still form a corporation, but you must follow all the same corporate requirements to stay in compliance.
Forming a Corporation
Signing a shareholders’ agreement in your company’s early stages can help ensure business continuity and avoid disagreements in the future. If you need assistance with drafting this legal document, it’s a good idea to consult with a corporate lawyer. You can also find a template online, but make sure to check with your specific state regarding what needs to be included. Every state has slightly different requirements for forming a corporation but, in general, you’ll want to follow these steps.
This allows those from other states to benefit from Delaware’s business-friendly tax advantages. Depending on your state, articles of incorporation may be called the certificate of formation or certificate of incorporation. Next, you’ll need to complete and file articles of incorporation with your state’s Secretary of State office.
We’ll review some new language and concepts in this process, but once you’re done, you may never need to think about this stuff again. If you’ve decided to incorporate as a C corporation, S corporation, or B corporation entity, this article will outline all the steps you’ll need to take. If you are a C corporation, use the information in the chart below to help you determine some of the forms you may be required to file. As a corporation in South Carolina, you must also file the Initial Annual Report of Corporations.
If you are considering this status for your business, keep reading to learn how to become a corporation. This article will not delve into the more complex options and requirements for a corporation’s stock. You can read further about the details of preferred stock versus common stock Classes A and B.
Make a record of the shares issued to each shareholder and the price paid. When incorporating your business, you may choose to form either a C or S corporation. One of the main reasons that people choose to form an S corporation is to save money on taxes.