How to Start a Corporation

The process of incorporating a business includes picking a name, filing paperwork with the state, and setting up management rules. While it takes some effort, starting a corporation can offer tax benefits and help your business grow. This guide will walk you through the key steps to get started.

Steps to start a corporation

1. Choose a business name

Your corporation's name is its identity. It should be unique, memorable, and reflect the nature of your business. Make sure the name follows your state's naming rules, which often require including words like "Corporation," "Incorporated," or abbreviations like "Inc." Before filing the Articles of Incorporation, check with the state's corporation filing office to confirm the name is available so the Articles will not be rejected.

2. Appoint directors

Directors are individuals responsible for overseeing the corporation's activities and choosing the officers of the corporation. They make major decisions and set policies. Most states require at least one director, but the number can vary. Choose directors who are trustworthy and have the skills to guide your corporation effectively.

3. File the Articles of Incorporation

Filing fees vary by state, so check with your local authorities for specific requirements. 

• Corporation's name​.
• Principal office address.​
• Purpose of the corporation.​
• Names and addresses of directors​. Most states also require the addresses of the incorporators. 
• Registered business address.​

4. Create corporate bylaws

Bylaws are internal rules that govern how your corporation operates. They outline procedures for meetings of directors and shareholders, voting, and may even determine the number of directors, their qualifications and terms, as well as the key officers and their duties. While not always required by law, having bylaws helps ensure smooth operations and can prevent disputes among stakeholders.

5. Hold an organizational meeting

After filing your Articles of Incorporation, hold an initial meeting. This initial organizational meeting may be called by the organizers (the people who signed the Articles) or by the directors (if they have already been chosen). During this meeting, you should:

• Adopt the Bylaws​.
• Appoint officers (e.g., President, Treasurer)​.
• Authorize the issuance of stock​.
• Set the corporation's fiscal year​.

Documenting these decisions in Meeting Minutes is essential for legal compliance.

6. Issue stock certificates

Corporations raise capital by issuing stock to shareholders. Decide how many shares to issue and distribute stock certificates to the initial shareholders. Keep accurate records of stock ownership, as this determines control and profit distribution.

7. Obtain necessary licenses and permits

Depending on your type of business and location, you may need specific licenses or permits to operate legally. Research federal, state, and local requirements to ensure compliance. Operating without the proper permits can lead to fines or even shutting down the business.

8. Apply for an Employer Identification Number (EIN)

An EIN, also known as a Federal Tax Identification Number, is like a Social Security number for your corporation. It's required for the corporation to file its income taxes, for it to open a bank account, and even to hire an employee. You can obtain an EIN from the Internal Revenue Service (IRS) online at no cost.

9. Open a business bank account

Separating your finances from your business finances is crucial. A business bank account helps manage income and expenses and simplifies tax preparation. It also adds credibility with customers and suppliers.

Checklist for starting a corporation

Things to consider when starting a corporation

• Business purpose and goals: Clearly define what your corporation aims to achieve. Understanding your mission helps with decision-making and aligning strategies with your objectives.
• Costs and funding: Starting a corporation involves various costs, including filing fees, legal expenses, and ongoing compliance costs. Plan your budget accordingly and explore funding options like investors, personal savings and loans.
• Legal and tax obligations: Corporations must meet specific legal and tax requirements. Consulting with legal and tax professionals helps ensure compliance and a clear understanding of its obligations, such as annual reports, taxes, and record-keeping.
• Management structure: Decide how your corporation will be managed. Set clear roles and responsibilities for directors and officers to keep operations running smoothly. You may greatly benefit from having discussions with initial shareholders and future directors in deciding the goals and organization of the corporation.
• Liability protection: One of the main benefits of forming a corporation is limited liability protection. To maintain this protection, you must follow corporate formalities and keep your personal and business finances separate.
• Market research: Conduct thorough market research to understand your industry, target audience, and competition. This helps guide your business strategy and identify both opportunities and challenges.
• Scalability: Think about the future growth of your corporation. A corporation makes it easier to attract investors and expand, but it also comes with more regulations. Make sure your business model supports long-term growth.
• Compliance and record-keeping: Corporations must follow strict rules, including keeping meeting minutes, financial reports, and tax filings. Failing to meet these requirements could result in penalties or the loss of legal protections.

Starting a corporation is a big step, but it can provide strong legal protection and long-term benefits. By following the right steps, staying compliant with legal requirements, and planning ahead, you can build a successful corporation.

If you’re unsure about any part of the process, be sure to consult with Legal Pros. With the right preparation, your corporation can be a powerful tool for growing your business! 🚀
 

Key takeaways Choose a name for the corporation that is unique and follows state rules. It usually needs to include "Corporation," "Incorporated," or "Inc." File Articles of Incorporation with the state and create bylaws that explain how your corporation will operate, including voting, meetings, and officer roles. Meet with directors to approve bylaws, appoint officers, and issue stock. Keep records of all major decisions. Apply for any required business licenses and get an EIN from the IRS for taxes and hiring employees. Keep your finances separate by opening a corporate bank account to manage money properly.

Additional resources

Learning how to enforce a contract is just one step. Explore these additional topics to learn more and take the next steps.

• What Is a Corporation?
• What Is an S-corporation
• How are Corporations Taxed?
• How to Register a Corporation by State