How to Form a Corporation
How to form a corporation in any state. There are several decisions one is faced with after deciding to incorporate a business and has already decided on the corporation as the entity type. The next steps will involve location, tax status, fiscal year, amount of authorized shares and the value, etc – each of these will be explained in sequence as this article explains how to form a corporation. In general the primary decisions will be based around the following steps:
- What type of corporation will you form?
- Where will you form a corporation?
- Organizational matters of the corporation
- Forming your corporation
Choosing a Type
When deciding how to form a corporation and selecting your corporation type, several factors, advantages and benefits will play into your decision. For starters, what type of business are you incorporating? In some states, professionals service providers, such as engineers, physicians, lawyers, psychologists, veterinarians, etc must form one type of corporation, known as a “professional corporation”. All corporation types offer limited liability and tax benefits, however there are many considerations here when learning how to form a corporation. How many shareholders (owners) will there be? More than 15 and “S Election” is ruled out, which allows corporations to be taxed as a sole proprietorship or partnership, similar to the LLC. Nonprofit corporations have even tighter parameters that vary by state. We have identified and listed the advantages, disadvantages and uses of all of the corporation types on another page of our website.
Where to Form
Although the state in which you conduct the majority, or all, of business transactions will most likely be the state you incorporate, there are some additional considerations that might play into your decision when learning how to form a corporation. Each state has some advantages and there are methods to benefit from these easily. For example, Nevada has void of franchise taxes, and there isn’t personal or corporate income tax. Some states also offer the use of bearer shares, which can be an element to asset protection plans. Delaware is another popular state for public companies, over half of the Fortune 500 are incorporated there. So if you’re looking for tax advantages, or modern and flexible business laws, among other things, you might consider forming a corporation in a state other than where you will conduct most of your business. Another consideration here is that doing business in another state may require a foreign qualification, which is essentially registering your corporation with the state(s) you are conducting business in. These and many other considerations are important factors. We have provide more information and state specific resources to help you decide where to form a corporation in another website section, please visit it to compare states and benefits.
How to form a corporation. Once you have decided on your type of corporation and its location, there are some specific details that will be required here. You will have to provide at least a primary entity name and corporate identifier, possibly with some alternates. Designating a registered agent and providing a physical location will be required. Allocating an initial amount of shares and its value is another part of the organizational process. Please note that all of these details can be changed by filing articles of amendment after the corporation has been formed, a simple one-page document recorded with the state office. Lets examine these organizational matters more closely:
- Entity Name: You will provide a primary name for your corporation, which will be the legal, recorded, name of the entity. There are some restrictions that each state will have for different entity types, for example a California Corporation cannot have the words “bank” or “trust” as part of the corporation’s legal name. A corporate identifier will be required, this is typically, “Inc”, “Corp”, “Incorporated” or “Corporation” – staying with our example, in California the name must include one of those identifiers.
- Registered Agent: You will need to list an individual or approved corporate registered agent on the articles of incorporation, this is a contact person or agency with a physical address within the state that you are incorporated in. Please note that Companies Incorporated is an approved corporate registered agent in all 50 states and packages include the first year of this service when you form your corporation with us.
- Shares: You will designate how many shares will be initially authorized when your corporation is formed. This includes the value of each share. Another decision further complicated by state specific rules and taxation. Some states will impose franchise taxes based on the amount of authorized shares, the value of authorized shares and in some cases, both. You want to be aware of this so you don’t find yourself with a huge tax liability imposed by your state shortly after you incorporated. Companies Incorporated specialists can assist you with this and all the elements here as you learn how to form a corporation.
- Fiscal Year: You decide when your corporation's tax year will end, you choose a month and your fiscal year ends on the last day of that month. Fiscal years are an advantage in some cases so that your corporation is not taxed on a calendar year, and you can roll money from one year to another, giving you additional flexibility.
Forming a Corporation
The act of incorporating is a simple process. You complete articles of incorporation and send them to the correct state office with the required state fees. Easier said than done. What you want to ensure is that your articles are accurate and correct, the first time. You want to be able to plan and know when your corporation will be filed and the process will be complete. You will need to understand which state office is the correct branch for filing different processing methods and corporation types. Some states require that you make a publication, a simple newspaper article stating the corporation will be formed, its name and some other minor details, there are generally approved newspapers and sources for these articles and specific requirements when doing this. Some expedited filings require the documents to be hand-delivered to the correct branch office of the state you are forming your corporation. Simply put, this can all be handled for you by Companies Incorporated, starting at $149. We are the answer to; how to form a corporation the fast and easy way with a satisfaction guarantee.