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How To Form A Corporation

Interested in learning how to start a corporation? Let’s start with an overview…

A corporation is a legal business entity that is formed under the rules of a particular state and a number of steps required for the formation.

While none of these steps are complicated, they are deliberate steps that must be

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properly followed.

Different states may have minor variants but the following are the common steps that are taken to properly turn your business venture

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into a corporate entity.

Naming Your Corporation

As with an LLC, when learning how to start a corporation, the name of the corporation needs to be selected first. The name selected must not be one already in use by another corporation (that’s why there is only one McDonald’s)

In certain states, you may be required to add the words “Inc,” “Corporation” or “Incorporated” to the name when starting a company.

Board of Directors

Once you find the appropriate name you then move on to the net step which involves designating a board of directors. In order to legally exist, a corporation must have a board of directors, shareholders and written bylaws.

If they do not then classification as a corporation will likely be rejected.

The directors are those individuals who make the specific business decisions of the business. In essence, they are the people who are in charge and they can be the owners of the company as well as other appointees.

Bylaws are the governing rules that a corporation must abide by. Additionally, bylaws will define the voting rights of the board of

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directors and the shareholders.

When learning how to start a corporation, keep the bylaws as simple as possible.

How To Start A Corporation – Articles of Incorporation

The third step is the actual filing of the articles of incorporation with a state’s corporate office. There may be minor variations from state to state but the articles of incorporation essentially define what your business is, who the board of directors is, the name of the corporation, contact information and the business’ physical address.

Please note, it is not

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always necessary to form the corporation in the business’ home state. Often, to avoid excess taxes and regulation it is not uncommon to incorporate a business in the most agreeable state. When learning how to form a corporation, you can also learn what state makes the most sense for you.

If for any reason the application for corporation status is rejected this does not mean all is lost. Simply look at the reason why the

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application was rejected and correct the problem. For example, if the company does not possess any bylaws then obviously drafting bylaws is the step that must be taken.

Thankfully, you can either form or remain an LLC during

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the time prior to the acceptance of the application for corporate entity status so issues of liability will not be a concern.

For many people, learning how to structure a corporation may prove to be a complicated process. There are obviously a number of components required for forming a corporation that do not exist in an LLC.

As such, if the process of forming an LLC proves difficult it may be best to consult with professionals who can handle the filing of the forms.

Professionals with significant experience handling the paperwork required for forming a corporation can usually eliminate instances of application rejections. This will save much time, effort and money and may be the best option to pursue.

These professionals know how to incorporate and have done it many times. However, just like you do with any professional service, make sure to check references before engaging incorporation services.

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