You are in: Home > Business Law

How to Form a Corporation - Step by Step Expert Guide on How to Incorporate Your Business!

23rd November 2009
By Amy C in Business Law
RSS Legal RSS    Views: N/A

Choosing a right structure of new company is a vital decision that needs detailed analysis of pros and cons of each available option in terms of your current and future business needs. Before we start working on forming a new corporation, let us have a quick glance on pros and cons of Corporation.

Pros: The owner has limited legal liability. Corporate structure attracts more investors and that offers effective capital management options. Under the corporate structure, each group has clearly defined role and responsibility. With income splitting, you can reduce the overall income tax by taking advantage of lower corporate tax rates. On the first $75,000 of the corporate income, the corporate tax rates are typically lower than the owner's personal income tax rates.

Cons: Compared to other options, forming a corporation is expensive and time consuming process. All corporate formalities need to be observed in totality that means you have to be very organized at all times. Under the traditional corporations you have the disadvantage of double taxation - meaning the corporation pays taxes on its profits and stock holders also pay taxes on dividends. You can of course eliminate double taxation with S Corp option.

Now if you have decided that Corporation is the right choice for you, let us talk about how to form a corporation. You can form a traditional Corporation or Sub Chapter S Corporation. Pros and cons of these options need careful review and consideration. In many States, people who are in the occupation of doctors, lawyers, or accountants can incorporate their practice only through a Professional Corporation.

Here are the steps to form a Corporation:

* Choose your business name according to State rules. Some States need you to include word like Incorporated or Corporation at the end of your business name. Please try to choose a name that has some kind of relevance with the nature of your business. This helps marketing later on.
* Check with the State that your proposed business name is available.
* Register your business name and fictitious name for DBA purpose.
* Register your business as Foreign Corporation in all other States where you plan to operate.
* Decide corporate structure for your Corporation. Generally this structure has three main categories: Board of Directors, Corporate Officers, and Shareholders. Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and Secretary are the best examples of Corporate Officers. The roles and responsibilities of these groups also need to be clearly defined through various legal documents.

* Prepare, sign, and file your Corporation's Articles of Incorporation. Generally this contains some basic information of your Corporation like name and address, corporate purpose (business activity), name and address of Registered Agent, Stock information like number of authorized shares, type & class of shares, and value of each share etc. You need to pay filing fees to the State when you file your Articles of Incorporation.
* Prepare Corporate By-Laws for your record. You don't have to file this with State.
* Prepare Shareholders Agreement to manage future issues related to buy-out or buy-sell situation.
* Elect "S" Corp tax status if necessary.
* Hold first meeting of Board of Directors and start maintaining minute book.
* Issue Stock Certificates to stock holders.
* Obtain business license and permits for your Corporation from Federal, State, and Local agencies.
* Make sure to follow all legal requirements to run your Corporation.

You might want to check our quality start-up services. We encourage you to visit our website to learn more about how to incorporate your business.


Amy recommends Bipin Bhatt, a New Jersey based Accountant. He offers high quality & affordable accounting services, tax, and payroll services. Bipin offers expert advise on how to incorporate in New Jersey and he is considered to be one of the best NJ Accountants. Bipin also offers nation wide tax, accounting, & payroll services.
This article is free for republishing
Bookmark and Share

Ask a Question about this Article

powered by Yedda