The steps to becoming a corporation are:

  1. Choose a name for your business.
  2. Appoint company directors.
  3. File your Articles of Incorporation.
  4. Draft corporate bylaws.
  5. Draft a shareholders' agreement.
  6. Hold an initial board of directors meeting.
  7. Issue shares of stock.
  8. Register stock offerings with the Securities and Exchange Commission.
  9. Obtain an Employer Identification Number.
  10. Obtain any required permits and licenses.

First Steps to Forming a Corporation: Choosing a Business Name and Company Directors

In general, when choosing a name for your corporation, the following guidelines apply:

  • Your business's name can't be the same as another currently registered business name.
  • It must end with a designator that identifies it as a corporation, such as “Incorporated” or “Corp.”
  • It can't include certain words restricted by the state.

Conduct a corporate name search to make sure your name is unique and doesn't infringe on a trademark. You can check with your state's corporations office to find out if your desired business name is available.

Next, you'll elect directors to make important financial and policy decisions. Some of their responsibilities include:

  • Authorizing the issuance of stock.
  • Appointing officers.
  • Approving corporate loans.

Usually, the initial owners or shareholders of the corporation appoint directors before the business starts.

Important Documents

You'll file an Articles of Incorporation with the corporate filing office in your state. Depending on the state where you incorporate, this document may have other names, such as “corporate charter” or “certificate of incorporation.” It doesn't have to be a long, complicated form, and it may just take a few minutes to fill out.

You'll specify some basic details about your corporation. This includes the business name and address and the name of your directors. You may also have to include the type and amount of stock issued. You'll probably also have to list the name and address of your company's registered agent.

There will be a filing fee to file your articles. The fee amount varies by state.

Your state may or may not require you to draft corporate bylaws, but it's a good idea to have them for the following reasons:

  • They outline the purpose of your company.
  • They govern day-to-day business operations.
  • They set meeting rules and voting requirements for shareholders and directors.
  • They outline the shareholders' rights and duties.

In most cases, the directors adopt bylaws at the initial board meeting.

Another document that may not be required in your state is a shareholders agreement. These may be more common in small, closed corporations. This agreement may outline:

  • How to admit new owners.
  • How existing owners can leave the corporation.
  • The procedures to follow if an owner dies, retires, or becomes disabled.

The Board of Directors Meeting and Issuing Stock

At the initial board of directors meeting, directors usually do the following:

  • Set the company's fiscal year
  • Appoint officers
  • Adopt bylaws
  • Authorize the issuance of stock shares
  • Adopt an official corporate seal and stock certificate form

You'll prepare, execute, and deliver stock share certificates. You must also update the company's share ledger. You have to keep track of the number of shares the business issues, the number of shares each shareholder owns, and the number of outstanding shares.

Don't conduct business as a corporation until you've issued shares of stock. This step formally divides up the ownership interests and is required if you want to qualify for the legal protections that fall under your corporate status.

Last Steps

You must issue stock in accordance with securities laws. Large corporations register with their state securities agency and the Securities and Exchange Commission (SEC).

You'll obtain your Employer Identification Number from the IRS. This number is required to open a business bank account and file business taxes. Finally, check which licenses and permits you'll need to conduct business as a corporation in your state. These may include business licenses, zoning permits, and sellers' permits.

Because starting a corporation can be a complex process, you may want to consult with legal and tax professionals when you decide to form one. That way, you'll ensure you're meeting all of the necessary requirements. In addition, professionals may advise you on the best ways to maximize your advantages.

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