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Forming a Corporation

But this service is included in every Incfile formation package, including the free plan. The registered agent must be available during regular business hours to receive documents in person.

Forming a Corporation

Corporations are often chosen by business owners who require a formal business structure with flexible ownership options. C corporations allow the purchase of stock not only by individuals foreign or domestic, but also by other companies or legal entities. Every legal business entity in the United States is required to appoint a registered agent.

As a corporation, the enterprise exists as a legal entity separate from its owners. Most importantly, this means that the owners cannot be held responsible for the debts of the corporation.

How Long Does It Take To Incorporate A Business?

While it does have several significant advantages over the LLC , there are also some disadvantages that could apply depending on your exact situation. One that isn’t usually required is a name reservation fee, which is required by law in Alabama but is optional elsewhere. In most states, a name reservation only has a nominal fee — in many, this will only cost you $10-20. Another of the most common questions we hear from entrepreneurs is how much it actually costs to incorporate. If these drawbacks don’t bother you, then the corporation may be the right entity for you. As a result, you could lose some of your creative freedom and autonomy that you might have as a different entity type.

  • The proceeds can also be used to buy out a deceased shareholder’s interest pursuant to a buy/sell agreement.
  • The bylaws must be in agreement with the laws of the state and the policies and purposes in the corporate charter.
  • On top of being expensive, a corporation requires a lot of time.
  • As a separate legal entity, the corporation has a perpetual life.
  • Both require formal Articles of Incorporation and that each corporation observes the proper formation requirements as set forth by the Secretary of State.

Finally, smaller corporations have the option to file for S corporation status, which grants significant tax cuts. This business entity has a “pass-through” form of taxation, which means taxes are only paid at the individual level, and there is no corporate income tax paid. For example, a Delaware corporation that has its main business office in Texas must register as a “foreign corporation” with the Texas Secretary of State and must have a registered agent in Delaware. If the corporation is filing a with the California Department of Business Oversight, the fee is $25 to $300.

Opening a business bank account protects your personal assets and legitimizes your corporation. Separating your professional account from your personal account also simplifies your business’s tax filing and accounting processes. Articles of incorporation don’t have to be lengthy or complex. In fact, you can usually prepare articles of incorporation in just a few minutes by filling out a form provided by your state’s corporate filing office. Typically, the articles of incorporation must specify just a few basic details about your corporation, such as its name, principal office address, and sometimes the names of its directors. To learn more about the costs of filing the articles of incorporation, see Nolo’s article, How Much Does it Cost to Incorporate Your Business.

The registered agent is the person or entity designated to receive any service of process, documents, or other official communication on behalf of the business. You must name officers and directors before you can draft any of the corporation’s documents. All three designations may be held by the same individual if he is the corporation’s sole shareholder. While several states have laws designed to make them more attractive for corporations, the best state to incorporate in is generally the one where you are located and do the majority of your business. Certain corporate tax benefits or other laws may look appealing, but you may end up complicating things and paying taxes and meeting compliance regulations in multiple states. There are two formal types of corporations, but keep in mind it can be far more complex . Where they differ primarily is in taxation and corporate ownership, but some similarities include the following.

Step 3: Choose Initial Directors And Share Structure

Bplans is owned and operated by Palo Alto Software, Inc., as a free resource to help entrepreneurs start and run better businesses. A C corp, you have 75 days to file a simple form with the IRS. Form 8825 is not complicated, so if you want to go this route, get this form filled quickly and mail or fax it to the IRS. I’d recommend you find the correct forms yourself, and take a look at the process. If you feel there are a couple hundred dollars of value to getting help, go for it, and know that thousands of people make the same choice every month. Simply put, some people prefer the peace of mind, and others might find their state-issued forms a bit daunting.

Forming a Corporation

Serving legal professionals in law firms, General Counsel offices and corporate legal departments with data-driven decision-making tools. We streamline Forming a Corporation legal and regulatory research, analysis, and workflows to drive value to organizations, ensuring more transparent, just and safe societies.

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Like ZenBusiness, Incfile also receives excellent feedback from its customers, with around 27,000 positive reviews available online and just a few negative reviews. They’ll help you determine whether or not a corporation is right for you. If you decide to use our recommended services, we earn a small commission. LLCs making political contributions must file a form with State Board of…

A C Corporation is the default structure of an incorporated company. It’s a separate legal entity from its owners with a basic operational structure consisting of shareholders, officers, directors, and employees. Another variable that can add expenses is whether you choose to use an incorporation service https://www.bookstime.com/ or not, as most of these companies charge their own service fees in addition to the state’s formation fee. Similarly, whether you want a registered agent service will also affect your new corporation’s bottom line. If you opt for assistance from an attorney instead, your expenses will obviously grow.

Though similar in many ways, LLCs and corporations have quite a few distinctions that bring both advantages and disadvantages to each. As an individual starting their own business, it’s important to understand all of the nuances involved and choose the right structure for your company. The creation of a limited liability company is a much simpler process than creating a corporation and usually requires less paperwork. An important element of a corporation is limited liability, which means that its shareholders are not personally responsible for the company’s debts.

When’s The Right Time To Form A Corporation?

But then you’ll have to handle things like business name searches, corporate bylaws, banking resolutions, obtaining an EIN, and filling out IRS Form 2253 for S-corp election without any help. Using a business formation service like Incfile makes this process so much easier. The main advantage of a corporation is the liability protection it provides its owners or shareholders. Liability is limited because the corporation is a legal entity separate from its shareholder owners.

Forming a Corporation

The board of directors executes the corporation’s business plan. Although the members of the board are not personally responsible for the corporation’s debts, they owe a duty of care to the corporation and can incur personal liabilities if they neglect this duty.

Secretary Of State: Office

While there are a few government regulations for these informal business structures, they’re not nearly as comprehensive as the rules and requirements for corporations. Secondly, corporations are heavily regulated by the government.

  • If you intend to do business under a separate name from your corporate name, register a “doing business as” name, also called a “fictitious name,” “assumed name” or “trade name”.
  • If you used an incorporation service, they might have sent you a nice binder with your bylaws template, stock certificates, and maybe even a nifty corporate seal embosser (neat!).
  • Your company’s size, structure, goals, and more will determine if it is better to form a corporation or form an LLC.
  • A company is a legal entity formed by a group of people to engage in business.
  • Once you’ve picked a name, you can either incorporate your business immediately or reserve the name for future use.

The cost of operating your business will also vary based on whether it’s classified as a C corporation or S corporation. If you’re decided that incorporating your business is the right move, the next question is when you should do it.

Once you’ve found a legal and available name, you usually don’t need to file the name of your business with your state. When you file your articles of incorporation, your business name will be automatically registered. Your state’s corporations office can tell you how to find out whether your proposed name is available for your use. Often, for a small fee, you can reserve your corporate name for a short period of time until you file your articles of incorporation. File formal paperwork, usually called “articles of incorporation,” and pay a filing fee that ranges from $100 to $800, depending on the state where you incorporate. Note that if you are working with a lawyer or online incorporation service, you might name an “incorporator,” who is responsible for managing the articles of incorporation. This is typically a temporary role and ends once the incorporation process is complete.

Can You Buy A Duplex Under A Corporation Or Llc?

A corporation will continue to exist despite new owners or new shareholders and deemed to have a legal existence until it’s formally dissolved. Changes in personnel, directors, and shareholders doesn’t usually affect a corporation’s legal status. If you’re planning on forming a corporation, it’s highly recommended you do your homework or consult with a lawyer, have a CPA on hand, and know what you’re in for. There are many resources online to assist you, but please bear in mind not all websites contain accurate information. An article you read online isn’t a substitute for actual legal advice from an in-person or telephone lawyer consultation. The next step is to protect your corporation by getting business insurance.

It’s important that your corporation has a bank account that’s separate from the bank accounts of its owners. Check with the bank at which you intend to open the account to see what documents will be required. Some banks require a corporate resolution in order to open a corporate account, while others may need only a copy of the articles of incorporation. Most banks also require a corporation’s EIN or Employer Identification Number, which can be obtained from the IRS. In the first meeting, discuss the overall operations of the corporation including bylaws, appointing of corporate officers and authorizing the issue of stock. A limited liability company can be managed by managers or by its members. The management structure must be stated in the certificate of formation.

Step 1: Name Your Corporation

A corporation is created when it is incorporated by a group of shareholders who share ownership of the corporation, represented by their holding of stock shares, and pursue a common goal. Articles of incorporation filing fees range from $50 to $300, but the overall setup costs for a corporation depend on the state you are incorporating in and the type of corporation you need. If you can’t afford to hire an attorney, you can still file your applications and forms online or use third-party agents that offer direct services. An attorney can walk you through the business formation process. Corporate formation and governance laws vary by state and are constantly changing, so an experienced attorney will be invaluable in managing the formation process and avoiding any issues.

Form A Corporation Or Business

Complete our simple online questionnaire, or call us directly and one of our team members will walk you through the process. Choosing the right business type is important to the success of… If the name is already in use and you’re struggling to develop a unique name, Incfile even has a business name generator tool. In fact, you should register the name as soon as you know what it will be.

Choose A Name

Just be sure to think it through and really balance the positive and less positive impacts this decision may have on you, your business, and your relationships. It sounds unusual but some states, such as California, do have an alternative minimum tax for corporations. Your state’s tax website ought to give some guidance on this issue as well.

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