How to Start a Corporation: Step By Step Guide

Forming a corporation

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.

Similar to articles of incorporation, this document will officially register your business as a corporation. This document must be filed with the Tennessee Secretary of State. When forming a corporation in California, you must also file a Statement of Information. This document must be filed within 90 days of filing your articles of incorporation. A crucial step in forming a corporation is opening a corporate bank account. This account will be separate from the bank accounts of its owners, which helps protect your personal funds from any business liabilities.

  • This aspect of the corporation makes them an attractive choice for businesses that want to raise capital or gain the attention of potential investors.
  • (See Section 602 of the Business Corporation Law.)
    Please note by-laws and corporate books and records are not filed with the Department of State or any other state agency.
  • If a shareholder leaves the company or sells his or her shares, the C corp can continue doing business relatively undisturbed.
  • Notably, B corporations are not IRS or state-level tax structures.
  • An S Corporation offers shareholders limited liability by protecting shareholders’ personal assets from any business claims.

One of the main reasons that people choose to form an S corporation is to save money on taxes. To incorporate in Washington, you must file the Washington Initial Report within 120 days of your incorporation date. You may also include this report with your articles of incorporation. To officially register your corporation in New Mexico, you must file the New Mexico Corporate Initial Report. It must be filed within 30 days of receiving your certificate of incorporation from the New Mexico Secretary of State.

Easy Steps to Start an LLC in Georgia

Partnerships can be a good choice for businesses with multiple owners, professional groups (like attorneys), and groups who want to test their business idea before forming a more formal business. Sole proprietorships can be a good choice for low-risk businesses and owners who want to test their business idea before forming a more formal business. A sole proprietorship is easy to form and gives you complete control of your business. You’re automatically considered to be a sole proprietorship if you do business activities but don’t register as any other kind of business. While you may convert to a different business structure in the future, there may be restrictions based on your location. This could also result in tax consequences and unintended dissolution, among other complications.

  • The corporation does not get a tax deduction when it distributes dividends to shareholders.
  • The bylaws are a set of rules or regulations adopted by the board of directors of a corporation to govern the conduct of corporate affairs.
  • Minutes of all board meetings should be recorded and kept with the corporation’s records.
  • Before you can start doing business as a corporation, it’s also important that you obtain all of the required business permits and licenses.

This additional document must be filed with the South Carolina Department of Revenue along with your articles of incorporation. This statement must be filed with the Secretary of State during the same month that the certificate of incorporation was filed. This form will also contain the information that’s included in your articles of incorporation.

How does forming a corporation protect the owners of a business?

This keeps everyone in check and limits the power of each individual shareholder. So one person can’t always make a final decision without the approval of others. A corporation is a legal entity separate and distinct from the individual(s) who compose the business. It has rights and abilities similar to those of a natural person. Principal features are perpetual duration, limited liability and easy transferability of interests. Compare the general traits of these business structures, but remember that ownership rules, liability, taxes, and filing requirements for each business structure can vary by state.

If you’re considering one of these non-standard structures, you should speak with a business counselor or an attorney to help you decide. For example, the initial board of directors meeting can dive into the taxation of your corporation. The articles of incorporation are the official paperwork that registers your corporation with the state. You could get these documents from the Secretary of State’s office and fill everything out on your own, but that’s a hassle you don’t need to deal with. In short, this can be an individual person or an entity that is legally appointed to receive government correspondence, compliance documents, and service of process on behalf of your corporation. In addition to the name being brandable, it must be legally available.

Forming a corporation

The incorporation can be ended using the process called liquidation. This may be a voluntary decision to cease operations or may be forced by the financial collapse of the business. A company appoints a liquidator who sells the corporation’s assets. The company pays any creditors and distributes any remaining money to the shareholders. A corporation is created when it is incorporated by a group of shareholders with a common goal who share ownership represented by their holding of stock shares.

Frequently Asked Questions (FAQs)

You also must document financial dealings between the corporation and its shareholder, directors and officers. For example, a loan made to or from the corporation should be evidenced by a corporate resolution. In small, closely-held corporations, take extra precautions to see that all corporate formalities are observed.

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Actual fiscal policy of the corporation may rest with the Board of Directors and be largely controlled by the President on a day-to-day basis. Corporations also exist in perpetuity, as long as they are properly maintained and meet their obligations. So, unlike other entity types, the existence of the business is not tied directly to those who own the business. In the event of loan default or other credit-related issues, your personal credit would remain intact should the business go into bankruptcy. This also works the other way around; an owner’s less than ideal credit rating will have no bearing on the credit of the business.

Step 1 – Run a Business Name Search

While optional, a shareholder agreement is a great document to have in an unexpected event. Depending on where you’re located, the laws surrounding DBA names can vary. Be sure to check with your state’s Secretary of State office to ensure your DBA name meets all legal guidelines. Knowing how to form a corporation will get your new business venture off to a good start.

Not all states tax S corps equally, but most recognize them the same way the federal government does and tax the shareholders accordingly. Some states tax S corps on profits above a specified limit and other states don’t recognize the S corp election at all, simply treating the business as a C corp. Corporations have a completely independent life separate from its shareholders.

Please note that New York State law does not require a corporation to have a seal. The filing receipt reflects the date of filing, the name of the corporation, an extract of information provided in the Certificate of Incorporation and an accounting of fees paid. The Department of State does not issue duplicate filing receipts to replace those lost or destroyed. An S Corporation offers shareholders limited liability by protecting shareholders’ personal assets from any business claims. A cooperative is a business or organization owned by and operated for the benefit of those using its services. Profits and earnings generated by the cooperative are distributed among the members, also known as user-owners.

Besides obtaining funds from the sale of securities, a corporation may be financed by other sources. A bank may lend money to the corporation in exchange for the corporation’s short-term promissory notes, called commercial paper. Retained earnings provide a source of funds once the corporation is operating profitably.

The cost of their services range from $80 to $400 (in addition to your state’s filing fees), which many find affordable. LegalZoom also provides many related services and products that might help guide your new business in the right direction. As a business owner, it’s important to stay informed on what is required of you after forming a corporation. Some may ask for yearly reports, require you to issue shares and hold yearly meetings as well as keep accurate and complete records, written communications, financial statements and meeting minutes. Check with your state or consult with a lawyer for more information regarding the specific requirements to remain compliant. The best thing to do is research what documents are required for your articles of incorporation according to your specific state.

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 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. Additional paperwork is required when filing your articles of incorporation in Nevada. You Forming a corporation must also file the Nevada Initial List of Directors and Business License Application. This process must take place after filing your articles of incorporation with the Nebraska Secretary of State. When forming a corporation in Nebraska, you must also publish a notice of incorporation in a legal newspaper located in the same county as your corporation’s office.

Forming a corporation

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. Finally, you need to formalize your corporate bylaws and create a shareholder agreement. It’s essential to get these documents filed accurately and timely. Doing it on your own opens yourself up to human error, which can delay the process and add to your overall cost.

Unlike the other corporation types, nonprofits don’t have shareholders or pay dividends. Instead, profits are reinvested into the organization and used towards a mission for the greater good. Regardless of the entity structure you choose, Incfile can set up your corporation in all 50 states. If you plan to grow your organization and raise capital from outside investors, the corporate entity structure will be advantageous to your end goal. A certified copy of the filed Certificate of Incorporation may be obtained from the Department of State. The fee may be paid by cash, check, money order, MasterCard, Visa or American Express.

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