Your thriving business may have started out as a spontaneous side hustle, but if you want to enjoy the same basic protections that corporations have, then it’s time to incorporate.
Forming a corporation can protect your personal assets and provide benefits when tax time rolls around, but there’s a process to follow if you want to do it right. Use this checklist to get started on the road to becoming a corporate entity.
This checklist covers the basics of business incorporation, including documentation and legal proceedings, but additional measures may be required to comply with all local rules and regulations. Once you get through these steps, check with your state to find out what else is necessary to complete the incorporation process.
If you’re running a for-profit business, you can choose one of three structures:
Some business owners choose to incorporate in other states to save on fees and taxes, but this can become complicated. To begin with, you have to register twice: once as a domestic business in the state where you incorporate, and once as a foreign entity in your home state. And, while it may cost less to form your corporation and file paperwork, your business still has to pay at least some taxes in the state where you’re actually located.
No two corporations can operate under the same name, so yours must be unique from others in the area. Search for the business name you want to use on the website of your state’s Secretary of State office to find out if it’s available. To register the name, fill out and file the required registration form in your state and the state where you choose to incorporate, if applicable.
If you’re forming a C or S corporation, you need a board of directors to oversee operations. Company officers, employees or stakeholders may serve as board members along with “outside directors”, who have no personal stake in the company. The board’s job is to protect the interests of investors, aid in making pivotal financial decisions and handle policies relating to stocks.
Your corporation setup also needs a registered agent to accept mail and official paperwork for the company, as well as to receive service of process in the event of any legal action. You can choose your business attorney to handle this job or assign any trustworthy employee.
Both C and S corporations need to create documents known as articles of incorporation, which include the basic details of the business, names and addresses of board members and the registered agent, the purpose of the corporation and any pertinent stock information. Articles of organization for LLCs contain similar material. Both types of business incorporation documents are subject to state filing fees.
An operating agreement describes the management structure of an LLC and includes details of:
Corporations need bylaws, which are a bit more formal. Bylaws state how often meetings are held, how stocks are issued, how future board elections will be handled, procedures for record keeping and other legalities relating to structure and process.
If you’re intimidated by formal meetings, you’ll have to face your fear after incorporating! It may seem like drudgery at first, but it’s actually beneficial for your business. Meetings and minutes are not only required for S and C corporations, but they also give you a detailed record of all major decisions and changes that take place in the company. Should you ever be required to prove you’re in compliance with state corporation laws, you’ll have the documentation readily available.
Between the paperwork, the legalities and navigating initial board meetings, incorporating your business can quickly become an overwhelming process that takes your focus away from serving customers and driving growth. Hiring a professional with knowledge of the incorporation procedure and experience filling out documents takes a load off you as a business owner and ensures every detail is taken care of.
National Business Capital and Services provides expert incorporation guidance and offers ongoing support to help you through the first few months. Whether you want to become an S corporation, a C corporation or an LLC, advisors at National can handle:
If you’re not sure what type of corporation is right for you, the advisors at National are available to discuss your needs and goals. Get started with a free consultation, and save time and money on the incorporation process.
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Matt Carrigan is the Content Writer at National Business Capital & Services. He loves spending every day creating content to educate business owners across every industry about business growth strategies, and how they can access the funding they need!