Of all the various business legal structures, corporations are the most complicated to set up and maintain. But they also provide the most protection from personal liability, a greater ability to raise funds, and other advantages. In any event, the size and type of business will help inform the type of legal structure you should adopt. Before you rush into it, make sure you understand the process of incorporation and take it step-by-step.
Below is a checklist of steps to take when incorporating your business. Keep in mind that your corporation's start-up requirements might vary from the list below, depending on the specific type of business you are in, and where your business is located.
__1. Decide on a Business Name
Keep in mind that your state may require that your corporation's name include an identifying word such as "incorporated," "limited," "corporation," or an abbreviation of such a term. (Learn more: Pick a Winning Name for Your Business)
__2. Search Name Availability
In addition to searching for references to your corporation's chosen business name, you also should look for similarity to existing names. If your name is too similar to an existing name, to the point that it causes confusion, you may not be able to register it. (Learn more: Make Sure Your Proposed Business Name is Available)
__3. Register Your Corporation's Name
In addition to your legal business name, you also want to register any fictitious business name under which you conduct business. (Learn more: Registering Your Business Name)
__4. Pick a Place in Which to Incorporate
Even if your company's main operations are in one state, you may incorporate in another if it provides advantages. For instance, a significant number of businesses are incorporated in Delaware despite being founded or operated elsewhere. (Learn more: Forming a Corporation: Where to Incorporate)
__5. Choose Directors for Your Corporation
The board of directors is responsible for overseeing the operation and protecting the interests of the investors and shareholders. Directors may be officers of the corporation, investors, or individuals with no other stake in the company. (Learn more: Corporate Structure: Directors to Shareholders)
__6. Create and Sign Your Articles of Incorporation
The articles of incorporation are filed with your Secretary of State's office and serve as the official charter for your corporation. (Learn more: Writing and Filing the Articles of Incorporation)
__7. Write Your Corporation's By-Laws
The by-laws outline the responsibilities of the corporation's officers, directors, and shareholders; the overall purpose of the corporation; and who manages which aspects of the business. (Learn more: Writing Corporate By-Laws)
__8. Create aShareholder Agreement
It's not always necessary to create a shareholder agreement, or stockholder agreement, but it typically addresses the rights and responsibilities of shareholders, including share ownership terms and valuation. (Learn more: Shareholder Buyout Agreements)
__9. File Your Articles of Incorporation
__10. Elect "S" Corporation Tax Status (optional)
There are certain tax differences between a "C" corporation and an "S" corporationthat may be of interest to your business. For certain types of businesses, S Corporation status avoids "double taxation" while retaining the liability protections of C Corporation status.
__11. Open a Separate Bank Account
The corporation is its own entity, so you want to make sure you open a bank account in the name of the corporation as opposed to an individual.
__12. Start a Minute Book for Your Meetings
Keeping meticulous records will help your business meet its goals and hold officers and board members accountable. The minute book is a record of all discussions and actions taken at board meetings.
__13. Hold Your First Board of Directors' Meeting
Since it will be the first meeting, you will lay out the structure, vision, and goals of the corporation and establish the tone for future meetings.
__14. Issue Certificates to Your Initial Stockholders (if applicable)
Learn more by visiting our Securities Law section.
__15. Obtain Business licenses and Permits
See Starting a Business: License and Permit Checklist for a general overview.
__16. Follow All Legal Requirements for Running a Corporation
Corporations are more heavily regulated than other types of businesses, so make sure you're in compliance of all local, state, and federal requirements.
__17. Get Assurances by Speaking With a Business Attorney
Incorporating can be a long-term benefit to your new business in the long run, but the process can be complicated. To ensure that your new business complies with your state's legal requirements at all steps in the incorporation process, you may wish to seek professional assistance. Contact a local business organizations attorney today, who can help you best structure your business for success.