Incorporation Checklist: Everything You Need to Know
An incorporation checklist is an important tool that will help you make an informed decision about what type of business structure is right for you.3 min read
2. Starting a Corporation
3. Taxes and Licenses for a Corporation
4. Marketing Your Corporation
5. Other Factors to Consider
An incorporation checklist is an important tool that will help you make an informed decision about what type of business structure is right for you. It can also help ensure you have all the information and necessary documentation when you start the incorporation process.
Choosing your business structure will primarily depend on your business's goals. There are three main options for incorporation in the United States:
- LLC: Owners are taxed on their dividends.
- Traditional corporation: The business is a separate legal entity that pays taxes on its profits. Owners run the risk of being taxed twice as they also pay taxes on personal gains.
- S corporation: Structured similar to a traditional corporation but avoids double taxation. S corporations are formed by a special tax election, and there are strict requirements about who qualifies.
Articles of Incorporation
To form a corporation, you need to file articles of incorporation, which is sometimes referred to as a charter or certificate of incorporation. This document is typically filed with the Secretary of State's office in the state you plan to incorporate in. The state business registrar is the person who handles the articles of incorporation. Only a few states use another agency, but your Secretary of State's website will tell you where you need to file. The articles of incorporation must be filed prior to conducting business as a corporation.
Starting a Corporation
There are several steps you must take in order to form a corporation.
- Choose a name that is different from any other businesses operating in your state.
- Create a business plan that discusses your goals, what products or service your business will offer, your demographics, competitor analysis, three-year roadmap, projected financials, etc.
- Buy your website domain name.
- Appoint corporate officers who will handle the business's day-to-day operations.
- Issue shares.
- Ensure your intellectual property is well-protected. It should be owned by your company rather than one of the founders.
- Obtain your EIN or Employer Identification Number. You can obtain this number online from the IRS.
- Purchase the necessary insurance to ensure you have the proper commercial coverage for your business.
- Decide on a registered agent, who will be named on your articles of incorporation. Your registered agent must have a physical address in the state you are incorporating in.
Taxes and Licenses for a Corporation
You need to contact your state's taxation department as you may need a state tax ID number as well. It's also important to research any special business licenses you need for your industry. Some industries may require more licenses than others. Investigating your industry to determine what licenses you need can help ensure you have everything in order before starting operations. For example, if you plan to open a bar or another venue that will be serving alcoholic beverages, you must have certain licenses that will allow you to do so.
Marketing Your Corporation
You need to have a website for your corporation, and creating one is often easier than people assume. If you have a technical background, it may be even easier for you to design your site. If you are not a developer, there are several options. One is to build your website using a theme or platform that you purchase. This is the most affordable option and can handle your basic needs. You can also hire a web designer to build you a custom website from scratch.
When drafting your marketing plan, make sure to determine your market, strategy, goals, and budget.
Other Factors to Consider
There are other elements that should be added to a corporation formation checklist.
- What is the nature of your business?
- What type of assets will the business hold?
- How will investments and family assets be protected?
- What will the business's management control practices be?
- How many owners will be involved?
- How will assets be gifted?
- How will family disputes be avoided?
- Who has the authority to enter into contracts on behalf of the company?
- What is the succession plan for children and other family members?
- Who has decision making flexibility?
- Is there a need for start-up funding?
- What effect does an owner's departure or death have on the company?
- Is there any segregation of investments and assets?
- Who has ownership privacy?
If you need help drafting an incorporation checklist, you can post your legal need on UpCounsel's marketplace. UpCounsel only accepts 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.