How to Start a Small Corporation

Incorporation can protect investors from personal liability.

Incorporating your business can help protect you from any personal liability connected to the business. Incorporating does require a board of directors and officers, however, the bylaws can narrowly define what each board members is required or allowed to do in his official capacity. Understanding how to incorporate can help you streamline the process when you make the decision to move forward.

Instructions

1. Choose a name for your corporation. It does not have to match your business name. You can incorporate with a corporation name and then list your business name under the corporation. Be sure to choose a corporation name that you will be happy with over the long haul as you will be using this name throughout the incorporation process. Once you choose the name, do some research to be sure there is not a corporation in your state with an identical name.

2. Choose your state of incorporation. Most businesses file their articles of incorporation in the state in which they will run their business, however, many corporations from throughout the nation choose to incorporate in Nevada and Delaware because of their corporate-friendly environments. If you choose to incorporate in one of these states, be sure to check whether your home state has laws requiring that you "register" there after you file in Delaware or Nevada.

3. Select a board of directors. Most states require a minimum of a president, secretary and treasurer. Approach the potential officers and be sure they are willing to serve in that capacity and are willing to be named on the corporate paperwork as an officer.

4. Prepare and file your articles of incorporation with your Secretary of State's office. According to Smallbusiness.findlaw.com, articles of incorporation should include: your corporation's name; the address of the home office or principle office; and the purpose of your business. Smallbusiness.findlaw.com suggests using broad language in this section. This allows you to have several different types of businesses under your corporation name. Any information about your stock options should also be included in the articles of incorporation.

5. Create and write your corporation's bylaws. They should include the names of all board members; the terms of service that board officers will serve; the functions of each officer; and a paragraph to indemnify each of the individual board members from personal liability in any court action against the corporation. Finally, the bylaws need to address what procedure will be necessary to change any or all of the bylaws.

6. Open a corporate bank account and hold your first board meeting. Start a notebook that will record the minutes of the first and every future meeting.

References

• Smallbusiness.com: Checklist for starting a corporation
• Reuters.com: Starting a corporation
• Smallbusiness.findlaw.com: Writing and Filing Articles of Incorporation
• The Messiah's Ministries & Services, Inc.