How to Form Your Own Corporation - Incorporation Made Easy
A corporation is a type of business organization. One of the main purposes of the structure of a corporation is to protect individuals from personal liability for the actions of a company. A corporation exists as a separate legal entity from its owners, and is subject to specific formation and taxation laws that vary from state to state. However, the general steps in forming a corporation are similar no matter where you choose to locate your corporation.
- Difficulty:
- Moderate
Instructions
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1
Select a valid name. Your corporate name cannot be the same as the name of other existing corporations, and some states will not allow you to choose a name that is even similar to an existing name. Most states require you to include some form of the word "corporation" in your corporate name, and you cannot usually associate your company with the government or certain types of businesses unless you actually operate that type of company. For example, you generally cannot use the word "bank" in your name unless your company actually is a federally chartered banking institution.
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2
Appoint directors. Corporate directors are individuals who handle the major decisions for a corporation, such as the issuance of stock or the acquisition of another company. The necessary number of directors per company may vary by state.
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3
File articles of incorporation in the state where you want to establish the corporation. Also known as a corporate charter, the articles of incorporation can be fairly simple for single-director companies. For larger companies, corporate charters can be extensive. Usually, each director or his proxy must sign the articles of incorporation.
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4
Pay the appropriate fees. Each state charges its own fee to accept corporate documents, and many have specific tax laws for corporations as well. For example, as of 2011, in California it costs $100 to file articles of incorporation, $15 for the special handling required if you drop off your incorporation papers in person, and a minimum corporate tax of $800 per year, regardless of whether or not you make a profit.
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File any additional state-required paperwork. After you file your articles of incorporation and pay your fee, you are generally considered to have started a corporation. Some states require additional paperwork after you file your corporate charter. California, for example, requires a statement of information within 90 days of filing articles of incorporation, and annually thereafter.
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Tips & Warnings
After you have formed your corporation, you should generally draft corporate bylaws and issue stock to the corporate owners. Although you do not need to draft bylaws and issue stock to simply form a corporation, you will ultimately need these items to successfully function as a corporation.
