How to File a Corporation: Everything You Need to Know
Incorporating gives important personal liability protection to corporate shareholders.3 min read
If you want to know how to file a corporation, follow these steps:
- Choose a name for your corporation.
- Select a state in which to incorporate.
- Choose a registered agent.
- Choose a board of directors.
- File formation paperwork.
- Pay required fees.
- Issue stock.
- Obtain necessary licenses and permits.
A corporation is a separate legal entity from its owners. Corporations may do the following:
- Open bank accounts
- Own assets
- Pay taxes
Incorporating gives important personal liability protection to corporate shareholders. Corporations are the most complex business structure to set up and maintain, but they provide a number of advantages, including a greater ability to raise capital.
Filing a Corporation: First Steps
Choose a unique, original corporate name that doesn't infringe on anyone's trademark or brand. Your business name can't be too similar to existing names in the state you register. The name also can't mislead the public or imply an association with a government agency.
Names must comply with the state's guidelines, and designators such as the following are typically required:
Register the name with the appropriate state agency.
Choose a state in which to incorporate. You may incorporate in a state outside of the one where your main operations are if it's beneficial to do so. Many businesses incorporate in Delaware due to its business-friendly reputation, although the corporations are founded elsewhere.
Specific filing requirements differ state to state, so check with the appropriate agency to know the ones in your jurisdiction.
Choose a board of directors, which is the decision-making body for the corporation. Directors do the following:
- Make financial decisions
- Determine corporate procedures
- Choose officers
- Set salaries
- Approve the issuance of stock
Owners may act as directors, or they may appoint other people to the board. In most states, there has to be at least one director, no matter the number of owners. Again, each state is different, so check your state's policy.
Important Documents, Permits, and Licenses
You'll file formation documents with the state. They're typically called the Articles of Incorporation, but in some states, they may be referred to as a Certificate of Incorporation or a Charter. These are formal, legal documents.
You can either use a template to complete your Articles or prepare a customized document. Once completed, submit the document to the state. The Articles of Incorporation contain important information about your corporation. Typically, they include the following:
- Corporate name and address
- Director names
- Contact person's name and address
You must also name your corporation's registered agent, and you can state the purpose for forming the corporation.
Your corporation must have a minimum of one incorporator. All incorporators must sign the Articles of Incorporation, and their name and address must appear in the Articles.
All states require you to pay fees when you register a corporation. Depending on the state, your filing fees may range from $100 to $800.
How you submit your paperwork and fees also depends on the jurisdiction you're in. Sometimes, you can complete everything online, but in some cases, you may have to mail in documents or visit local or state offices. Usually, the Secretary of State (or equivalent agency ) website will have a lot of information for you.
You'll issue stock as part of forming a corporation. This includes recording how many stock shares you're authorized to issue.
Before you can legally operate your business, you must have all required permits and licenses in place. This ensures you're in compliance with local or state laws. The types of permits and licenses you may need include business licenses, seller's permits, or zoning permits. You can refer to local, state, and federal requirements to see exactly what your business needs.
You'll also need an Employment Identification Number, or EIN, from the IRS. This nine-digit number is free to obtain, and you can apply online, by mail, or by phone. The IRS uses this number to identify your business. You'll need it to open a bank account for your corporation.
Unlike a limited liability company, which is easy and inexpensive to form, a corporation has more requirements. You'll probably need tax and legal professionals to help you start a corporation to ensure you meet all guidelines.
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