What is a Corporation?
A corporation is a legal entity that can exist separately from its owners. Creation of a corporation occurs when properly completed articles of incorporation (called a charter or certificate of incorporation in some states) are filed with the proper state authority, and all fees are paid.
What Paperwork is Required to Incorporate?
Articles of incorporation conforming to state law must be prepared and filed with the proper state authorities and filing fees, initial franchise taxes, and other initial fees must be paid.
Do I Need an Attorney to Incorporate?
No, an attorney is not a legal requirement to incorporate. You can prepare and file the articles of incorporation yourself; however, you should understand the requirements of your intended state of formation.
If you are unsure if incorporation will benefit your business, consult an attorney or accountant.
What Should I Name my Corporation?
Choose the name of your corporation carefully. It is very important that you portray the image you want for your new corporation. Legally, the name you select must not be "deceptively similar" to any existing corporation or must be "distinguishable on the record" of your state. For example, if a corporation named Flower Corp. exists in your state, you probably would not be allowed to name your business Flour, Inc. It is possible that the name you select will not be available; therefore, we ask for a second choice on the incorporation order form.
Additionally, the name you choose must show your business is incorporated. Most states require that the corporate name be followed by some type of indicator, such as Corporation, Incorporated, or an abbreviation.
What is the Organizational Structure of a Corporation?
The organizational structure of a corporation relies on three basic groups: shareholders, directors, and officers.
A corporation is owned by shareholders; however, they do not directly manage the corporation. Instead, they influence corporate decisions through indirect methods such as electing and removing directors, approving or disapproving amendments to the articles of incorporation and voting on major corporate issues.
The directors, who comprise the "board of directors," are responsible for managing the affairs of the corporation. Usually, directors make only the major business decisions and supervise and appoint the officers who make the day-to-day business decisions of the corporation.
Officers are responsible for the everyday management of the corporation. Typically, officers are appointed directly by the board of directors.
It is important to note that a shareholder may serve on the board of directors and as an officer. In fact, in most states one person is enough to form a corporation.
How Many Directors Do I Need to Form a Corporation?
Only one director is required in most states although you can elect to have more. Some states use the number of shareholders in the corporation to determine the minimum number of directors. If the number of shareholders is three or more, then the corporation must have three directors. If the corporation has less than three shareholders, then the number of directors may equal the number of shareholders.
What is a Publication Requirement?
A few states require notice to be published in a newspaper that a corporation or LLC has been formed. States with this requirement include: Pennsylvania (corps only), Georgia (corps only), Arizona (corps and LLCs), Nebraska (corps and LLCs), and New York (LLCs only). The filing performed by BizFilings completes the publication requirement for each of the states except for New York LLCs.
What is a Delayed Effective Date?
Certain states allow for a business to choose an effective date for when the business will officially be formed as a corporation or LLC in that state. For instance, a business owner submitting a formation order in November of 2004 can choose an effective date of January 1, 2005, when his company will be officially recognized as a corporation or LLC in that state. The potential advantages of delayed effective dates are:
-
You can choose your company's actual effective date
-
You can avoid being taxed in the current calendar year
-
You can avoid needing to file an annual report for the current calendar year
-
You can avoid the backlog states typically encounter at the beginning of the new year.
How Do I Get Started with the Incorporation Process?
If you choose to incorporate, articles of incorporation must be filed with that state and initial fees must be paid. BizFilings will complete these administrative tasks quickly and effectively.
After your articles are filed, your corporation must hold an organizational meeting where bylaws are adopted and the incorporation process is completed. Share certificates should be distributed to shareholders and these transactions should be recorded on the corporation's stock ledger. All of this information should be kept in a corporate record book.
BizFilings corporate kit includes all of the information and paperwork needed to make this process easier.
