July 6, 2020

What Is A Corporation?

Forming a Corporation

Check your state’s list of restricted words such as “national” or “reserve” and contact your state’s office to ensure your name complies with all other rules. Submit the completed Articles of Organization, transmittal, form, and $110 filing fee to the Secretary of State’s Corporations Division. For a nonprofit corporation, determine whether the corporation will have members.

  • On-line filing system for business owners and 3rd party non-service company…
  • Many attorneys and business professionals suggest 10 million.
  • If a small business is unable to spend a significant amount of its profit during a tax year on expenses to grow the business, it could make sense to structure the business as a corporation rather than an LLC.
  • This is not a matter with which the Secretary of State may assist.
  • For example, C corporations don’t have ownership restrictions, while S corporations are limited to 100 shareholders, who must all be U.S. citizens.
  • Fees for business licenses and permits will vary depending on what sort of license you are seeking to obtain.
  • Double taxation may be partially or completely avoided in a small business by paying a salary to the employee shareholder.

You’ll have to make sure you comply with LLC regulations in the state in which you founded the LLC. Where C corporations have a fixed structure made up of shareholders, directors, and officers, LLC members can structure the business as they wish. LLCs can run large businesses, and they can transition to become C corporations if they outgrow their LLC status.

Having a buy/sell agreement in place minimizes disputes over the company value and facilitates the purchase of the withdrawing shareholder’s interest by the corporation or other shareholders. Sound tax advice is needed to minimize the impact of double taxation of your revenue–at the corporate level and when it is passed only to you as dividends or salaries. A corporation must follow certain formalities dictated by law to maintain its corporate status. There are many tax strategies that can only be employed by a corporation. In addition, a corporation provides opportunities to retain or pass along earnings in ways that are not allowed in partnerships, sole proprietorships or even LLCs. As a separate legal entity, the corporation has a perpetual life.

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More In File

Your entity type affects the amount of autonomy you have in your business affairs. Sole proprietorships, for example, are controlled exclusively by the owner. While there are a few government regulations for these informal business structures, they’re not nearly as comprehensive as the rules and requirements for corporations. If you operate a sole proprietorship or general partnership, then you would need to pay for the settlement personally, as your assets would be confiscated in the event your business couldn’t make the payment. A corporation, however, has personal asset protection thanks to the corporate veil, so the corporation itself would pay for the settlement, not the individual members of the corporation.

  • For general information on corporate bylaws, please see the Bylaws page.
  • Instead, you just need to file for a Federal Tax ID with the Federal government.
  • Alternatively, C corporations offer a business structure geared more toward raising money and future growth.
  • Unlike other business entity types, a corporation protects each owner’s personal assets.
  • Articles of incorporation don’t have to be lengthy or complex.
  • For many businesses, the best option is to file as a corporation.

A higher business credit score will also help your business obtain loans and higher credit limits later on. To operate your corporation, you must comply with federal, state, and local government regulations. You should keep the corporate records book at your principal location. A share class is a group of shares that has a unique set of rights and privileges compared to other shares of the same corporation. Each class, termed a share class, holds different rights and privileges. You can have multiple classes and each class can hold any number of shares.


S corporations and LLCs both have the option of having one or more owners who are personally liable for their debts and liabilities. Owners benefit from limited liability, with profits and losses taxed separately. Either the articles of incorporation or the corporation’s bylaws must state the number of directors that will constitute the corporation’s board of directors. The initial director or directors of the corporation may be named in the articles, but this is not required. At the first meeting of the directors/shareholders, they have to approve the incorporation and elect a board of directors. If you have bylaws detailing how meetings should be called, make sure that you have followed them closely. The meeting kicks off the formal operation of the corporation and also approves or changes any bylaws.

Forming a Corporation

It’s a separate legal entity from its owners with a basic operational structure consisting of shareholders, officers, directors, and employees. An S corporation is a tax designation that can be used by corporations and LLCs alike.

Tips For Drafting Corporate Bylaws

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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. A corporation is a legal entity that is separate and distinct from its owners. Under the law, corporations possess many of the same rights and responsibilities as individuals. They can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes. As previously mentioned, one of the advantages of Forming a Corporation in your home state is that any officer or director can act as the registered agent. However, there are some advantages to having another person or company act as your registered agent. First, this adds an extra layer of privacy, since the name and address of the registered agent is publicly available.

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Unless the articles of incorporation state otherwise, the board of directors has the authority to set the “consideration” (i.e., the amount to be received) for each share of stock. The Secretary of State’s website provides a simple, fill-in-the-blank form for articles of incorporation. Alternatively, you can file articles of incorporation online using the accessIndiana interface. For general information on corporate articles of incorporation, please see the Articles of Incorporation page. The laws of each state view a corporation organized in that state as a domestic corporation and a corporation organized in any other state as a foreign corporation.

  • A foreign entity is one that already exists outside of the State of Georgia – whether that is another country or simply another U.S. state.
  • There is no additional paperwork that must be filed with Indiana to obtain “S” status.
  • A domestic corporation has been incorporated under the laws of the State of Maine.
  • File formal paperwork, usually called “articles of incorporation,” and pay a filing fee that ranges from $100 to $800, depending on the state where you incorporate.
  • Determine what tax and other regulatory obligations the corporation has, and take care of any necessary registrations.

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Corporation Management

Your business corporation needs a Federal Tax ID for a variety of purposes These include paying Federal taxes, opening a bank account, getting employees on board, and filing for business licenses and permits. Articles of Incorporation is also referred to as the Certificate of Incorporation. https://www.bookstime.com/ It is a legal document laying out a basic summary of your business. The information includes your company name, business purpose, number of shares offered, the value of shares, directors, and other officers. It is costly and time-consuming to start and operate a business corporation.

Forming a Corporation

A corporation elects a board of directors, conducts annual meetings, and adopts bylaws. The process can be complex and lengthy, depending on the state in which it incorporates. To be recognized as a corporation, your company must follow the proper legal proceedings for your state. There are several types of corporations, including C corporation, S corporation, B corporation, closed corporation and nonprofit corporation. Each corporation type has its own benefits, disadvantages and legal requirements. Once created, only professionals can own shares of the corporation.

Corporation Vs Other Entities

Yes, when you incorporate your business, you will have the option to designate a perpetual lifespan or a specified dissolution date. While most of its competitors have rather mediocre customer service departments, staffed by outsourced call centers, Northwest has highly trained professionals answering its phones at all times. These experts can help answer many tough questions that competing companies’ support teams won’t have a clue how to answer. Creating a corporation requires both time and money, so you may want to avoid those costs unless you’re sure your business will work. Next, you must appoint directors to serve on your initial board. Most states require you to have at least one to three initial directors, but you can appoint more if you wish.

Forming a Corporation

A step-by-step guide to forming a new business entity in Delaware is available on the Division of Corporations website. We reviewed the top business incorporation services and LLC formation services to see which has the best overall value.

C Corporation Faqs

Some tax statutes also provide for the personal liabilities of the board of directors. The board of directors executes the corporation’s business plan. Although the members of the board are not personally responsible for the corporation’s debts, they owe a duty of care to the corporation and can incur personal liabilities if they neglect this duty. They hold an annual meeting during which they elect a board of directors. The board hires and oversees the senior management that is responsible for the corporation’s day-to-day activities. The life of a corporation begins upon the filing of articles of incorporation with the secretary of state’s office. Prior to filing the articles of incorporation, the following issues should be considered.

As you can see from this list of topics, a significant amount of thought must go into defining your corporate structure. Our solutions for regulated financial departments and institutions help customers meet their obligations to external regulators. We specialize in unifying and optimizing processes to deliver a real-time and accurate view of your financial position. For more information, check out our What is a Registered Agent page. If you expect to reinvest most of the profit back into your small business, an LLC is the right choice.

Forming a Delaware corporation is a formal, streamlined process and the following sections provide a practical overview. Accordingly, in your initial communication, please do not tell us anything you want to keep private. Please provide only the identity of all other parties to the dispute or transaction you are inquiring about and a brief description of the nature of the dispute or transaction. For over 32 years, Puget Law has provided exemplary legal services in the areas of estate planning , probate, small business, and real estate.

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