How To Start A Corporation: Everything You Need to Know
A great part about incorporation is getting a lower tax rate. You will also get better taxable benefits than other forms of business. 3 min read
How to Start a Corporation
There are many benefits of knowing how to start a corporation. It is crucial that you are aware of all that goes into the process so that you can operate successfully.
Benefits of Starting Your Own Corporation
A corporation is liable for its own debt and legal responsibilities rather than you. There are some securities that are for the owners that protect against liabilities, but it is still ideal for you to get business liability insurance.
There are banks that will require the guarantee of the owner. In this case, the security of your assets become at risk should the company be sued or close.
A great part about incorporation is getting a lower tax rate. You will also get better taxable benefits than other forms of business. Corporations can raise money more easily than a sole proprietorship or partnership. This is because a corporation can sell shares when money is needed.
It is easier to valuate a corporation than other businesses. Selling it would be easier when it comes to the valuation of the company.
Choosing a Corporate Name
Picking a name for the business will need to abide by state corporation rules. The name must be unique and not like the name of other corporations that are currently on file.
The name of the company will need to be appended with a corporate designator such as corp., inc., or ltd. It should not include words that suggest the corporation is associated with any federal entity.
State corporations offices can help you find out if your corporation name is already in use. Some states will allow you to reserve your corporate name. The time frame and costs on holding your name will vary in different states.
You will need to consider that the corporate name does not violate another trademark that does not belong to you. Different names used to sell the corporations products must be labeled as “fictitious” with the state and country of business headquarters.
Incorporation can be filed in a different state from where you intend to primarily operate if it is beneficial.
Be sure to check the availability of a web domain for your corporation name before finalizing, especially if you intend to build a website for the company.
The directors will make all major decisions for the corporation, including those on policy and finances. Examples are issuing stock, appointing corporate officers, setting salaries, and approving loans.
The owners and shareholders prior to the company opening will appoint directors. In general, the owners will name themselves directors. Directors do not have to necessarily be owners.
The state will dictate how many directors are required to be on the board. Some may only require one while more may be needed elsewhere.
Filing Articles of Incorporation
The articles of incorporation will need to be filed in the corporate filing office, also paying the required fees. This is the general document that creates the corporation. It is also referred to as a charter or certificate of incorporation.
One person can own corporations. That person will prepare, sign, and file the articles of incorporation. If more than one person owns the corporation, all owners can sign the articles, or choose one person as the incorporator to sign.
Most states will have a pre-printed form for articles of incorporation available to you at the Secretary of State’s office. The articles will need to list some basic details about the business, such as the corporate name, the office address, and names of the directors.
It will be required that you list the name and address of at least one of the directors that will serve as the registered agent. This allows members of the public with a name to contact with regard to the corporation.
Obtaining Licenses and Permits
You will need to obtain the required licenses and permits to start a business. This will include a business license, employer identification number, seller’s permit, or a zoning permit.
The SBA will have a list of all state business license offices to find out what other requirements are needed in your state.
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