C Corp Requirements: Everything You Need to Know
C corp requirements allow a corporation to be formed under state law. 3 min read
C corp requirements allow a corporation to be formed under state law. The corporation will be governed in accordance with the rules applicable in the state where the members set up the enterprise.
Information About Forming a C Corporation
It is recommended to set up and register a corporation in the state where the business is based. However, there are some states, such as Nevada and Delaware, that have more favorable laws regarding corporations. Operating from one state is less costly, though, as you will avoid having to register in multiple states as well as paying taxes in those states.
If you file in Nevada or Delaware but will not be doing business in either state, you must register your business as a foreign corporation in the state where your business is physically located and pay applicable taxes. If you fail to pay the taxes due in Nevada or Delaware, the corporation is considered illegally operating.
Choosing a legal name that addresses state requirements is also an important step. The name you want cannot be too similar or identical to another business or cause confusion, nor can it be one that is barred according to state law. Check with the Secretary of State where your corporation will be doing business to ask about reserving the name you want.
If you plan to have a corporate website, wait to purchase a domain that uses the name until you've confirmed that it's available and legal to use that name for your corporation. Note that the name you register must include "incorporated," "corporation," "limited," "corp.," "ltd.," or "inc." at the end.
Steps to Form a C Corporation
Articles of Incorporation
A fundamental requirement to form a C corporation is the creation of its articles of incorporation. This document:
- Serves as the basis of the corporation's structure.
- Outlines the way the enterprise will operate and lists the principal officers.
- Serves as a charter that enables the corporation to be created.
Articles of incorporation are created and then filed with the Secretary of State.
Stocks and Shareholders
A C corporation is owned by shareholders. To clarify what happens to a shareholder's interests in case there is a bankruptcy, retirement, or disability, creating a shareholder agreement is advised.
C corporations must be in compliance with federal and state law in regard to stock and shareholders. Once compliance is fulfilled, stock certificates can be issued to shareholders.
Your state or local agencies may require additional identification numbers. Check with the local licensing board and apply for any that are required. Since requirements may vary in different jurisdictions, you will need to determine if your business will be responsible for taxes related to payroll, disability, and unemployment.
Board of Directors
C corporations must appoint and maintain a board of directors. The board members are charged with overseeing all operations of the business.
Each state in the U.S. requires a corporation to have a minimum of two officers, including a president and a secretary. There are no limitations to the number of directors appointed to the board. Other positions can be created at the C corporation's discretion.
The C corporation must appoint a registered agent in the state where the business is located and in any other state where the corporation does business. The resident agent is also referred to as an "agent for service of process."
The agent may be a business entity such as a law firm or an individual. The agent is authorized to accept petitions in a lawsuit or a summons involving the corporation. The designated agent can be either a professional registered agent or a corporate officer.
Written bylaws are required to operate a corporation. These are the rules that govern the shareholder agreement and the corporation.
The bylaws should include information on the number of directors, how long they'll serve, compensation of officers, rules for amending and adopting bylaws, and the time and place for shareholder, officer, and director meetings.
Bylaws apply for the duration of the corporation, but they can be amended.
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