8 Steps to forming a corporation.

If you’ve looked through the list of corporate structures and have decided that you want to start a corporation in the US, here are the steps you should take:

1. Choose a business name that complies with your state’s corporation rules.

• The name cannot be the same as the name of another corporation on file with the corporation’s office.
• The name must end with a corporate designator, such as “Corporation,” “Incorporated,” “Limited,” or an abbreviation of one of these words (Corp., Inc., or Ltd.).
• The name cannot contain certain words that suggest an association with the federal government or any restricted type of business, such as: Bank, Cooperative, United States, Federal, National.
• Perform due diligence to ensure the name won’t violate another company’s trademark.

2. Appoint the initial directors of your corporation.

• Directors will be making the major policy and financial decisions for the corporation. Some of the items on their agenda for the directors should be to issue stock, appoint officers, and approve loans. Often, the owners simply appoint themselves to be the directors, although directors do not have to be owners.
• Most states only allow a corporation to have one director, regardless of the number of owners. Whereas in other states the number of directors will correspond to the number of owners.

3. File formal paperwork, which are usually referred to as “articles of incorporation”.

• This will usually include paying a filing fee ranging from $100 to $1000, depending on the state where you incorporate. Look for a state that is best for your corporation based on a number of factors.
• Prepare and file “articles of incorporation” with your state’s corporate filing office, which is most likely at the secretary of state’s office, located in your state’s capital.
• No state requires a corporation to have more than one owner. With a single-owner corporations, the sole owner would prepare, sign, and file the articles of incorporation. Co-owned corporations, could have the owners each all sign the articles or delegate one person to sign.
• Articles of incorporation are mostly a formality, they don’t have to be extensive or complicated. You can even prepare articles of incorporation by filling out a form provided by the state’s corporate filing office.
• They  will include details such as the name, office address and names of directors in some instances.
• Most likely one of the directors will serve as a ‘registered agent’ or ‘agent for service of process’ so that there is a person on file for the public to contact, for lawsuits and otherwise.

4. Create corporate “bylaws,” which lay out the operating rules for your   corporation.

• Bylaws are the internal rules that govern the day-to-day operations of a corporation,
• When and where the directors’ and shareholders’ meetings will take place and the extent of the shareholders’ and directors’ voting rights and requirements.
• When creating bylaws it might be advisable to hire a lawyer to draft them for you. The bylaws can then adopted by the corporation’s directors at their first board meeting.

5. Create a shareholders’ agreement.

• This agreement can regulate many different aspects of the corporation. It is particularly useful for small business owners to decide and plan what happens when an owner retires dies or leaves the corporation for another reason.
• Some other items to include in a shareholders agreement could be voting rights, share split, intellectual property rights, anything that there should be an agreed upon now rather than later.

6. Hold the first meeting of the board of directors.

• At this meeting, many different things need to be accomplished. First and foremost the company should:
  • Select corporate officers
  • Approve the corporate bylaws
  • Authorize the issuance of shares of stock,
  • Implement an official stock certificate form and corporate seal.
  • If the corporation will be an S corporation, the directors should approve the election of S corporation status. S Corps allow for pass-through taxation, but are somewhat limiting as to the amount of stock and shareholders the company can have.

7. Issue stock certificates to the shareholders of the company.

• It is important that you don’t conduct official business before you issue stock.
• When you issue stock shares, you are formally dividing up ownership interests in the business.
• This is a requirement of doing business as a corporation
• Issuing stock can be complex because it must be accomplished in accordance with securities laws.
• Large corporations must register their stock offerings with the federal Securities and Exchange Commission (SEC) and the state securities agency. Registration takes time and typically involves extra legal and accounting fees.
• If you are a small corporations, you may qualify for exemptions from securities registration. Consult a professional to see if you qualify, as state by state requirements are often different.
• if your corporation is issuing stock shares to a small number of people (generally ten or less) who will actively participate in running the business, it will certainly qualify for exemptions to securities registration.

8. Obtain any licenses and permits that are mandatory for your business.

• This will vary greatly on the type of business you are trying to run.
• Most likely you will need a business license, which is also known as a tax registration certificate.
• You may also have to obtain an employer identification number from the IRS, a seller’s permit from your state, or a zoning permit from your local planning board.