Formation, LLC, Corps Steps to Take Before Incorporating Your Business

In this article we will cover the information you need to create and incorporate a for-profit corporation, including C-Corporations, S-Corporations, Limited Liability Companies (LLC) and more. The steps to create a for-profit corporation are listed at the end of this article.

Incorporation: Creating a For-Profit Corporation

People who run sole proprietorships (small businesses that are not incorporated) are typically concerned with the cost and the formalities required for creating a corporation. However, the ability to limit your business liability is usually well worth the cost of incorporating your business, which is typically only a few hundred dollars. The amount required varies from state to state and it will differ with regard to the type of business organization chosen.

Do I Need an Incorporation Specialist?

The incorporation process can seem intimidating, especially for the first time. Creating a new corporation involves unfamiliar terms and concepts and requires a reasonable time investment to make sure that it is done properly and that there are no critical mistakes. Having an experienced business professional can help you understand and decide which type of business entity is most suitable for your endeavor, for example, choosing between an s-corporation, c-corporation or limited liability corporation. An incorporation specialist can help with understanding terminology, filling out forms and filing the corporate paperwork with the state. The real benefit to using an incorporation specialist is that they typically provide the option to purchase a corporate kit at a relatively low bulk rate price. A corporate kit typically includes an impressive hardcover binder with the name of the company stamped on the cover, a copy of sample corporate bylaws, articles of incorporation, meeting minute pages, stock certificates, transfer ledgers and a corporate seal.

Do I Need a Business Lawyer or an Accountant?

While not necessary, a consultation with a business lawyer and an accountant is certainly a prudent and helpful step to take before starting a new company. At times, advice from a business lawyer, tax specialist or an accountant can be of paramount importance. They can help you determine which entity (such as a c-corporation, LLC, s-corporation and others) is most appropriate for your need, goals and tax position. Choosing the wrong business entity could result in high taxes or corporate fees being paid. A good lawyer can also help you create bylaws that can satisfy the needs of many members and provide a solution to conflicts that may arise amongst the founders of the company. While the quote from a lawyer or accountant to incorporate is usually higher than other options, these business professionals will typically include a few hours of consultation in order to set up the company properly.

Do It Yourself: Incorporate Your Company

While having a business lawyer, an accountant or other specialist is certainly helpful, all of the necessary information you need to incorporate your company is available to you if you know where to look. Below you will find a list of all the necessary steps to incorporate your new company. Each linked article will provide best practices tips that you should read before you spend valuable time and money for filing fees. A good amount of general information and the forms you need are usually available on your state's Secretary of State or division of corporations website.

The Incorporator or Creator of the Organization

So how does a new corporation come into existence? Someone has to create the company and file it with the state. The person or group of people who create the corporation are called the "incorporator(s)". Each incorporator must be a natural person at least 18 years old and each incorporator's full name, current address and signature must be included in the filing with the state in order to create the new corporation. The incorporators are generally responsible for completing all of the steps listed below, including filing the certificate of incorporation with the Department of State and adopting the corporate bylaws.

Steps to Create a For-Profit Corporation

1. Define the primary purpose and mission statement of your company
2. Choose a company name for your corporation that complies with state and federal law
3. Determine what type of business entity is most appropriate
4. Appoint the initial directors of the corporation
5. Create and file the Articles of Incorporation
6. Create the bylaws (rules and policies) for your nonprofit organization
7. Hold your initial board of directors meeting.
8. Apply for any permits, licenses or legal requirements necessary to run the business of the organization.

The next article in this series of "How to Incorporate a Business (For Profit) is "How to Choose a Good Company Name".