how to form a corporation

After spending a few hours comparing business entities, you’ve come to the conclusion that you want to form a corporation. Although this is great news, you’re nowhere near done. There’s still a long list of important tasks you must complete to create a corporation. Here’s everything you need to do to form a corporation.

1. Choose a business name

Since you already know what business entity you want, then next step to forming a corporation is choosing a business name. Follow these tips to create the perfect name for your business.

  • Pick a name that defines you: When naming your business, you want your customers to instantly get a good idea of what you do.
  • Strive for uniqueness: Your business name should be as creative as possible. Don’t be obscure. You want your audience to grasp your concept.
  • Create four names: Come up with a few names and check if they are in use.
  • See if your business name complies with your state’s corporation division.
  • Do a business entity name search: This will allow you to see if your business name is available.

Next, remember that when forming a corporation, you’ll need to follow the corporate business naming rules:

  1. The business name must be different from another corporation on file in the corporation’s office.
  2. The name must end with ‘corporation (corp.),’ ‘incorporated (inc.),’ limited (ltd.),’ or its abbreviation.
  3. The business name cannot have words that are prohibited by the state.

Lastly, use this business entity name search to see if your business name is available. This will help you avoid wasting time and money spent on creative assets, domain names, or a logo for a business name that can’t obtain.

2. Appoint directors

A board of directors must be appointed by initial owners (shareholders) for long-term management purposes. Choose wisely, as these directors will handle important financial and policy matters for your business.

You can either select yourself, shareholders, or others you see fit to be on the board of directors. Many states only require one director for a corporation while some limit it to two and three. Check with the secretary of state to see how many owners you will need for your board of directors.

3. File articles of incorporation

In order to form a corporation, you must file your articles of incorporation with your secretary of state. If your secretary of state doesn’t file your articles of incorporation, they may have an appointed agency that takes care of those matters.

The articles of incorporation will include the corporation’s:

  • Name and office address
  • Business purpose
  • The duration of the corporation. Ask yourself, how long will your corporation exist. There are owners who only create corporations for limited periods of time.
  • Name and address of the registered agent
  • List of names of directors (Not every state requires this.)
  • Shares of stock information
  • Articles of incorporation signatures (You’ll also need the name and addresses of anyone who signs the articles of incorporation.)

Filling out the articles of incorporation doesn’t have to be a long and drawn out procedure. Visit your secretary of states office and fill out the form easily.

4. Draft corporate bylaws

Corporate bylaws help a business maintain consistency in the way it operates and communicates organizational rules. In the long run, this document helps avoid conflict and disputes too.

To be specific, bylaws are the detailed set of rules agreed upon and adopted and drafted by the founder or board of directors after you form a corporation. This document specifies the internal management structure of the corporation. Also, this includes how directors are elected, meetings are organized, and officer roster and summary of duties. Additionally, the bylaws specify details about ownership rights, annual meetings, and the addition or removal of officers and directors. Lastly, they may also contain information about how the business conducts its affairs as well as the individual duties of its directors, officers, and employees.

5. Shareholders Ownership Changes Agreement (Optional)

It’s highly recommended to have a shareholders ownership change agreement. If you think you won’t need one, you may want to reconsider. In case of the unfortunate accident of death, illness, or disability, you’ll want something in place already that transfers ownership onto a trusted person. Also, if you decide to retire or startup in a new industry, you’ll already have a clear idea of who will own your old business.

6. File a DBA (Doing Business As)

This next step is not necessary for every owner who forms a corporation. But, if you want to conduct any sort of business with a name that is different than the one you filed on your corporation paperwork, then you need a Doing Business As name (DBA).

You must make sure that your DBA name doesn’t infringe on any existing copyrights, trademarks or service marks of any other business. Visit the Secretary of State website for whichever states you want to file a DBA in and use their online name search to check if your name is available.

Once you have applied for your DBA, most states require you to publish information regarding your DBA in at least one local newspaper. You must publish your DBA notice for four consecutive weeks in many cases, but this varies from state to state so it is best to refer back to the SBA website to find out what your state requires. Once you have your DBA make sure to keep it in a safe place where you won’t lose track of it.

7. Host an Initial Board of Directors Meeting

The first board of directors meeting should cover the adoption of bylaws, the appointment of corporate officers, and the issuing of stock. Additionally, the board of directors can discuss the possible election for S Corporation.

8. Issuing Stock

Before you can issue stock, the board of directors must first authorize it. When you issue stock, you are distributing shares of the company that is distributed to investors. Investors include shares owned by outsiders and insiders.

9. Obtain Licenses and Permits

Licensing and permit regulations depend on the type of business, its location, and where it conducts business (locally, regionally, or nationwide). Visit the Small Business Administrations website to see what licenses and permits you’ll need to operate your corporation.

10. Maintaining a corporation after forming a corporation

Maintaining a corporation is not as hard as many believe it to be. You just have to keep track of what to do and when. For example, after you register your business with the state, be aware of the several filings that may be required on an annual basis. If you don’t your business could easily fall out of compliance. This can further result in fees and possible involuntary dissolution.

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