Starting or running your own business can be exciting but daunting. This is especially true if you’re starting a corporation. To help people understand this type of business, here are the answers to some frequently asked questions (FAQs) about corporations.

What is a legal corporation?

A corporation is a legal entity that is formed by individuals, groups, or, sometimes, other organizations. A corporation is distinct and separate from its organizers and shareholders as far as legal and financial matters are concerned. When a corporation is legally created, it is like an independent and distinct person in the eyes of the law. The corporation is responsible for its own debts, handles its own tax returns, and so forth.

What are the advantages of creating a corporation?

When you create a corporation, you and your shareholders enjoy personal liability protection. Your personal assets, such as your savings, your home, and your car, are all protected. With a corporation, you are taxable on a lower rate than if you simply reported your salary as a self-employed individual. Furthermore, corporations have a potential to experience greater access to capital and to offer employees incentives such as stock and stock options.

What is the corporate structure?

The corporate structure consists of a document known as the Articles of Incorporation. This document outlines the business purpose of the corporation, allows for stock issuance, and tells what happens with any assets resulting from the sale or dissolution of the corporation. The corporate structure also includes the corporate by-laws, and Board of Director resolutions passed to authorize actions by the corporation. Additionally, the corporation will have a Board of Directors who appoint officers of the company and act as the "governing body" overseeing the overall management of the company.

What are the steps to incorporate a business?

First and foremost, you need to choose a name for your corporation that is not currently being used by another company registered in the jurisdiction in which you are filing your incorporation papers. After you’ve chosen a name, you must submit the Articles of Incorporation to the Corporate Registry Office, where they will be reviewed and approved. Also, if you are issuing shares as part of your corporate structure, you must have a Stock Transfer Register available to track the transfers of ownership. Finally, you will need to obtain necessary business licenses and permits to establish your status as an operational entity.

What are the responsibilities of a corporation?

Once you’ve created your company, you’ll need to adhere to its responsibilities as a corporation. These will include filing appropriate paperwork in a timely manner, providing the shareholders with periodic financial statements, arranging for an independent audit exam of the financial statements, and issuing dividends. Additionally, corporations need to pay any applicable taxes associated with the corporation, such as annual franchise taxes.

When it comes to complicated matters such as understanding or establishing a corporation, local counsel is essential - whether you need a one-time consultation or an entire freelance legal department, UpCounsel’s network of experienced lawyers is available to help. With their help, you’ll have access to high quality attorneys, business attorneys with an average of 14 years of experience, and you’ll be able to view profiles of various online attorneys displaying ratings and reviews of recent work.

Topics:

Corporation,

Business Law,

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