A corporation is the highest form of business organization. For those entrepreneurs looking to increase their business’s influence and presence, here are a few steps to becoming a corporation.
Choose Your Corporate Structure
The first step of becoming a corporation is to choose the type of corporate structure. There are four basic types of corporations: C corporations, S corporations, limited liability companies (LLC) and non-profits. Each structure offers various levels of legal protection, taxation, and flexibility, so it’s important to research each one and understand the advantages and disadvantages before making a selection.
Research State Laws
Before officially starting a corporation, it’s important to understand the regulations and laws in the state where it will be based. This includes filing necessary documents such as articles of incorporation and obtaining licenses and specialty permits required to operate in certain industries. Additionally, it’s important to make sure that the business name is available and not already taken in the state.
Create Your Corporate Charter
The corporate charter outlines the rules that govern your corporation. This document should address the legal structure, the purpose of the business, the names of the directors and executives, the type of shares available, and the qualifications and responsibilities of the shareholders.
Hold a Meeting of the Directors
Once the corporate charter has been created, a meeting of the directors should be held to pass it and to determine the ownership percentage of each shareholder. It’s important to document the decisions made during the meeting and keep a record of the meeting minutes.
Name Your Officers
At the meeting, officers should also be appointed to manage the corporation. This includes appointing a president, secretary, treasurer, and other officers as needed. It’s important to note that all officers must have the legal capacity to be officers.
Create Bylaws
Bylaws establish the internal regulations of the corporation that are not otherwise covered in the corporate charter. This includes regulations governing shareholders, directors, officers, and the corporation’s operations. The bylaws should be flexible enough so that they can easily be amended without constant approval from shareholders or boards.
File the Necessary Documents
After the corporate charter and bylaws have been signed, the necessary documents must be filed with the state. This typically involves submitting articles of incorporation and a statement of officers and directors. Additionally, it’s important to register for a federal tax ID number and other documents such as withholding taxes or any occupational and professional licenses required to operate in certain industries.
Establish Your Corporate Accounts
Once the documents have been filed, it’s time to establish corporate accounts. This includes registering for a business bank account, tax accounts, payroll accounts, and other accounts required for the business to function properly.
Adopt a Corporate Record System
It’s important to have a corporate record system to keep track of all important documents and decisions. This should include a record of the minutes and decisions made during board meetings, required documents such as the corporate charter and bylaws, the register of the shareholders, and any other documents related to the business.
Keep Your Corporate Status Current
As the corporation grows, it’s important to keep your corporate status current. This includes filing all required documents such as annual reports, any new articles of incorporation, and changes in the officer or director status with the state. Additionally, all taxes and fees should be paid on time and all licenses should be up to date.
Becoming a corporation takes a lot of hard work and research, but it can be rewarding for those who are looking to increase their business’s influence and presence. Following these steps will guide entrepreneurs towards incorporating and establishing a successful corporation.
