A corporation is a unique entity like an individual you create and control, and it has its instructions, lifecycle, laws, and tax life. The formation of a corporate entity is like doing your own personal taxes, and you have to do it everything correctly. The notion of launching the corporation would overwhelm you, and it’s completely normal. Today, we’ll discuss step by step guide on how to start a corporation.
How to Start a Corporation – Steps
Let’s discuss some of the main steps on how to start a corporation, and they’re as follows;
Choose Business Location
Different states have got different rules for the corporation. You should incorporate your business in such a state where you would run your business and have the physical location. While choosing the location, you should keep in mind your familiarity with state laws, knowledge of the state, people, and proximity to visit the government offices.
For instance, Delaware is a famous state for incorporations and it has the highest number of incorporated entities in the US. Some of the other reasons are friendly towards businesses, tax heaven, and easy legal processes. The favorable place for businesses in Nevada and Utah, but Delaware and Nevada remain the top two places.
When it comes to naming your business, you should in mind the following things;
- A name that describes your business
- Remembered by customers
- Not going to be rejected by other states
- Won’t cause any types of legal issues
One of the important things in launching your business is the name that would hang outside of your window. Some of the main tips for inventing the business name are as follows;
- Descriptive: other than tech giant companies like Google, Apple, and Bing; the name of the company should tell customers about themselves
- Flexible: while being descriptive, you don’t have to be overly specific; it would limit your product offers, you should keep in mind the future
- Online: it is like a domain name that people would find over the internet
- Be Yourself: even if your business name is legally good, your business name should confuse and mislead people. Like you’re using the name like bank and insurance, but your company doesn’t offer such services.
Board of Directors
The Board of directors is a group of people that have the legal authority to act on behalf of the company. The total members of BOD vary from state to state, and you have to check it with your relevant state. Usually, some states require that particular positions like president, secretary, and treasury should be from the BOD. The initial investors become the mentor and board members, and that’s why you should carefully choose your friends.
The owner of the company is usually the board member. If you’re hiring the services of any legal attorney, then you should add him/her as the “incorporator” that is responsible for organizing the articles of incorporation. The role of an incorporator isn’t permanent, and it ends after completing the job.
You should either hire a registered agent/attorney or represent the company by yourself. The role of the attorney/agent is to comply with the mails and lawsuits, and you should write his/her address in the state of incorporation. However, if someone files a lawsuit against you, then it’s the job of your agent to contact you properly on time.
It’s important o mention here the good news that the cost of hiring an agent isn’t very high. If you outsource an agent for your business, then he would comply with all of your company’s legal needs. However, hiring an agent is a very good option for online businesses that don’t have a proper physical address, and their workings hours are flexible.
File your Articles of Incorporation
Filing for your articles of incorporation is a step either you can do, or your attorney would do for you. The documentation process isn’t difficult, and you can easily prepare your documents.
However, the article of incorporation is the official document that you file for the registration of your company. It comprises the board of directors, registered agent, and your company’s chosen name. The required documentation detail would be available on the secretary of the state office or website. The filing fee ranges from 100-to 800 dollars depending on the state where you’re filing.
Creating your corporation’s bylaws is easier than you think, and it comprises your company’s daily routine policies and employment contracts. In fact, some states offer you readymade templates in the form of “fill in blank” style.
The objective of the company’s bylaws is to outline the operations and procedures of your business. It comprises simple things like roles and responsibilities of members, BODs, names, and location. You would mention in the bylaws that you’ll edit the laws in the future.
Record Book of Corporate
If you have employed the services of an attorney or agent, then they would send you a corporate seal, stock certificates, and binder with your bylaws template. If you’re doing it by yourself, then you have to buy the binder and the binder is a legal requirement. However, it’s important that you should keep the seven years worth of files safe. In the worst-case scenario, the judge would ask you for the document in the legal proceedings.
First Board Meeting
The first difficult step is to set the board meeting; some of the main guidelines are as follows;
- Set such meeting time that all the members could easily attend
- Send a copy of the bylaws to all the board members
- The Board secretary would record the minute of the meeting
- Name all the board members and their roles and responsibilities
- Offer them all the state-required documents like stock shares, bylaws, and article of incorporation
- Existing board members would appoint the board of directors, their salaries, roles, and responsibilities, and titles
It’s the stage where you issue stock formally and the amount of ownership of stakeholders. The cash you generate from every share would help you to grow, run, and perform various operations of your business. Some corporations would require registration from the SEC, and you should check whether it’s mandatory for your business or not.
Run Your Business
You have reached the ideal stage where you can do the corporate work that you love. It’s important that you should comply with all the rules and tax regulations in order to run things smoothly.
Conclusion: How to Start a Corporation
After an in-depth study of how to start a corporation; we have realized that launching a corporation requires a lot of work. If you’re planning to form a corporation, then you should follow and practice the abovementioned guidelines.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.