Forming a corporation: Selecting A Business Structure
Most states require the owners to file articles of incorporation with the state and then issue stock to the company’s shareholders. The shareholders are required to elect the board of directors in an annual meeting. Some states allow a type of corporation called a close corporation, which may appeal to small business owners.
Most businesses will also need to get a tax ID number and file for the appropriate licenses and permits. A California GP must have two or more persons engaged in a business for profit. Except as otherwise provided by law, all partners are liable jointly and severally for all obligations of the partnership unless agreed by the claimant. The information is intended to provide a basic understanding of the different business structures and is not intended to provide legal advice. Delaware is a popular state to incorporate in because of its lenient laws for business owners.
File your articles of incorporation
Corporations are often chosen by business owners who require a formal business structure with flexible ownership options. C corporations allow the purchase of stock not only by individuals foreign or domestic, but also by other companies or legal entities. A C corporation, also referred to as a general for profit corporation, is one of the most common entity types chosen by new businesses. Additionally, corporations allow the issuance of stock, which is a benefit for entrepreneurs and venture capitalists who may want to invest in your business. A California corporation generally is a legal entity which exists separately from its owners. While normally limiting the owners from personal liability, taxes are levied on the corporation as well as on the shareholders.
We provide you with your completed filings and any other necessary documentation. Sit back and relax while one of our filing experts completes the required paperwork quickly and accurately on your behalf. To learn more about the differences between an llc and a corporation, take a look at our detailed llc vs corporation comparison.
What are the types of corporation to choose from?
Without an initial meeting, the board might lack direction or clarification that enables them to make clear decisions about the corporation. If you are the sole shareholder, you can still form a corporation, but you must follow all the same corporate requirements to stay in compliance. A shareholders agreement is a contract between the owners of a small company.
Follow these steps to get your business up and running quickly and easily. Stock is typically issued as a physical certificate or in the form of digital shares. Kelly is an SMB Editor specializing in starting and marketing new ventures.
- This means that shareholders may take part in the profits through dividends and stock appreciation but are not personally liable for the company’s debts.
- In small, closely-held corporations, take extra precautions to see that all corporate formalities are observed.
- In some cases, you are legally required to file for corporation in another state.
It’s important to find the right balance of legal protection and corporation benefits that meet your specific needs. Choosing a business name is the first important step in forming a corporation. Your business name must be different from the names of existing businesses in your state. You can search name availability online at the website of the secretary of state or other state agency responsible for business filings. Each state office has specific rules in regard to your corporation’s name and you must comply with the rules of your state’s corporate division. That said, filing for a corporation is something that business owners can easily do on their own.
Tips for drafting corporate bylaws
Once this certificate has been filed along with the filing fee, the corporation is official. To officially register your corporation in New Mexico, you must file the New Mexico Corporate Initial Report. It must be filed within 30 days of receiving your certificate of incorporation from the New Mexico Secretary of State. Whether it’s the cost to incorporate, the difference in tax laws, or variation in document names, it is common for the incorporation process to vary slightly from state to state.
- If a close corporation appeals to you, consult an attorney in the state you are incorporating in to determine if a close corporation statute exists.
- It also means that the corporation can own assets, sue or be sued, and borrow money.
- To incorporate in Washington, you must file the Washington Initial Report within 120 days of your incorporation date.
- At MyCorporation, we’re here to help you keep track of your documents and ensure they’re all filed correctly.
Incorporating your business separates you from your business as a separate legal entity, preventing you from being fully responsible for any debts accrued by your business. Some tax statutes also provide for the personal liabilities of the board of directors. They hold an annual meeting during which they elect a board of directors.
What is the cost of filing for a corporation?
Directors do not have to be elected and officers do not have to be appointed. In addition to these formalities being eliminated, the laws usually streamline some of the other meeting and voting requirements. The intent is to relieve some of the administrative burdens to the small corporation owner. If a close corporation appeals to you, consult an attorney in the state you are incorporating in to determine if a close corporation statute exists. Observing all the corporate formalities provides evidence that the corporation is a separate legal entity rather than an extension of the shareholders.
Starting a corporation
There are several third-party B corp certification services, but none are required for a company to be legally considered a B corp in a state where the legal status is available. A benefit corporation, sometimes called a B corp, is a for-profit corporation recognized by a majority of U.S. states. B corps are different from C corps in purpose, accountability, and transparency, but aren’t different in how they’re taxed. You’ll still have to follow the strict filing and operational processes of a C corp. On-line filing system for business owners and 3rd party non-service company… This statement must be filed with the Secretary of State during the same month that the certificate of incorporation was filed.
What is the difference between filing for a corporation and forming an LLC?
The reason it is necessary to enforce the notion that the corporation is a separate legal entity is to protect the limited liability of the shareholders. Once your corporation has been officially formed and bylaws have been drafted, hold a meeting of the initial board of directors. Minutes of all board meetings should be recorded and kept with the corporation’s records. To form a corporation in the U.S., it is necessary to file articles of incorporation with the state in which it will be registered. Usually, incorporation is immediately followed by the issuance of stock to the corporation’s shareholders. After this point, in an annual meeting, the shareholders will elect a board of directors.
The Secretary The Secretary is typically responsible for maintaining the corporate records. In addition to these required officer positions, a corporation may also have vice presidents and/or assistant secretaries or assistant treasurers. The Treasurer The Treasurer is the chief financial officer of the corporation and is responsible for controlling and recording its finances and maintaining corporate bank accounts. Actual fiscal policy of the corporation may rest with the Board of Directors and be largely controlled by the President on a day-to-day basis. The President The President has the overall executive responsibility for the management of the corporation and is directly responsible for carrying out the orders of the board of directors. This aspect of the corporation makes them an attractive choice for businesses that want to raise capital or gain the attention of potential investors.