How To Set Up as Corporation: Everything You Need to Know
How to set up as corporation, which is defined as the process of incorporation for the purpose of creating a corporation, is a topic that many entrepreneurs are interested in learning more about. 3 min read
How to set up as corporation, which is defined as the process of incorporation for the purpose of creating a corporation, is a topic that many entrepreneurs are interested in learning more about.
Seven Steps to Starting Your Own Corporation
It can be more time-consuming and costly to start a corporation in comparison to other types of businesses. If you want to start your own corporation, you should follow these steps and get an accountant and lawyer to advise you throughout the process.
One of the main advantages of a corporation is limited liability, which separates the personal assets of the owners from the assets of the corporation. In the event that your corporation goes bankrupt or faces a lawsuit, the personal assets of the owners won't be used to satisfy any debts or monetary settlements. Essentially, incorporation has the potential to reduce the impact of disasters on the owners of a corporation.
According to BizStats.com, only 22 percent of the small businesses in the United States are a C corporation, S corporation, or limited liability corporation. 72 percent of all small businesses are solely operated and accordingly prone to liability risk.
Your decision to begin a corporation should depend on your needs as well as the needs of your business.
Also, once you set up the corporation, it will be necessary to adopt resolutions and bylaws. You will also need to establish a lengthy paper trail to make sure that you and the other owners enjoy the advantages of operating a corporation.
You should prepare the bylaws for the corporation to summarize the company rules when it comes to duties, operations, and officer positions.
In certain states, bylaws are not required for the formation of a corporation. However, it is still recommended that you establish and maintain bylaws for your corporate records.
You should keep corporate minutes for all of the shareholder and board meetings. The corporate minutes will allow you to keep a record and formalize any decisions that are made during these meetings. This includes the appointment of officers, board members, and resolutions of importance.
Next, you should prepare and submit the IRS Form SS-4 to apply for an Employer Identification Number. You may need local and state permits to operate your corporation legally depending on the nature of your business.
In the event that you feel confused or overwhelmed at any stage during the process of forming a corporation, you should contact an attorney to guide you though the process of incorporation.
Certain types of corporations need to be formed under special laws or by an act of legislation. Public utilities, banks, and insurance companies are a few examples of such corporations.
You should perform a corporate name search to ensure the name you selected for your business is unique and won't encounter trademark issues in the future. You can conduct a search on the website of the local secretary of state to determine whether a business name is available.
If you won't be using your real name as your business name, you will need to file a fictitious name for your business. This is referred to as a DBA, or "doing business as." You will need to file for the fictitious business name with the county in which you reside.
It is generally easier and less expensive to establish a corporation in your home state than in another state.
An LLC offers most of the same advantages as a traditional corporation along with a few unique benefits. An S corporation is identical to a C corporation. The only difference is the S corporation tax status, which is elected with the IRS.
While pass-through taxation and liability protection are the main advantages of S corporations, there are some requirements that you will need to fulfill to establish an S corporation:
- Your business needs to be a domestic corporation.
- The business cannot have a number of shareholders that exceeds 100.
- Only eligible shareholders must be included.
- There must only be one class of stock.
If you need help with how to set up as corporation, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.