How to Incorporate Online: Everything You Need to Know
Wondering how to incorporate online? Your ability to incorporate a business online depends on your state.3 min read
2. Naming Corporations
3. Picking a Tax Status
4. Appointing a Board of Directors
5. Drafting Company Bylaws
Wondering how to incorporate online? Your ability to incorporate a business online depends on your state. Some states allow you to file your Articles of Incorporation with your Secretary of State electronically. Other states do not have an electronic filling option.
Preparing for Incorporation
If you want to incorporate a business, you would need to file formation documents known as Articles of Incorporation with your Secretary of State.
Before you file these documents, however, it's important to make sure that your business is ready for incorporation. Setting up a corporation before filing its formation documents means your company will be able to hit the ground running once it is actually established. Some of the tasks involved in setting up a corporation include:
- Naming your company.
- Appointing a board of directors.
- Drafting corporate bylaws.
Choosing an appropriate name for your company is one of the most important parts of incorporation. The name that you choose should relate to what your corporation does and should be memorable so that customers will easily associate your name with your company.
When choosing your name, make sure you understand the corporate naming requirements in your state. In most states, you'll need to include a designator of your corporate status in your name, such as Corp. or Inc. Some states also prohibit the use of certain words in the name of your company. For instance, you usually cannot use a word that would give the impression that your corporation is government affiliated.
If there's a name you're interested in using, you should make sure that it's available by searching the registered business name database in your state. You can also search the United States Patent and Trademark (USPTO) database to determine if your desired business name is already trademarked.
In some states, you may have to reserve or register your corporation's name. Generally, this involves submitting a registration form and paying a nominal fee.
Picking a Tax Status
After you've chosen a name for your company, you will need to decide how you want your corporation taxed. Your company can choose taxation as a traditional C corporation or as an S corporation. Whichever option you choose, the owners of your corporation will enjoy limited liability for the company's debts.
There are some important differences to consider between these two taxation options. For federal tax purposes, S corporations are a type of pass-through entity. This means that the corporation does not pay taxes directly. Instead, the profits and losses of the company are allocated to shareholders, who will then report these amounts on their personal tax returns. To qualify for S corporation tax status, your company must have less than 100 shareholders.
C corporations, on the other hand, can have an unlimited amount of shareholders but are vulnerable to double taxation. This means that the profits and losses of the company are directly taxed, then are taxed again as dividends on shareholders' personal returns.
Appointing a Board of Directors
Once you've selected a tax status, you're ready to appoint your board of directors, who are usually chosen by a company's shareholders. Most states require that you name your directors in your formation documents, so it's important to choose your directors as soon as possible.
Your board of directors is responsible for overseeing your company. It makes important decisions for your corporation, including hiring managers and deciding when to issue stocks. It's possible for the owners of your company to name themselves as initial directors and then appoint a board of directors at a later date. Some states also require a minimum number of corporate directors. Check the rules in your state to make sure you've appointed the correct number of directors.
Drafting Company Bylaws
Writing and adopting company bylaws is the last step that you should take before filing your Articles of Incorporation. Your bylaws outline the rules for running your company. Usually, a company's bylaws are an internal document, but some states require that you file them.
Include the following information in your company bylaws:
- Information about your company, such as its address and name.
- The number of officers and directors.
- Your stock classes and the number of authorized shares in each class.
- Duties of shareholders, officers, and directors.
- The dates of shareholder meetings.
- Procedures for maintaining and reviewing company records.
- Rules for amending bylaws and the Articles of Incorporation.
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