What is a Corporation?
A corporation is a legal business structure where ownership is separated from management. Shareholders own the corporation, elect a board of directors to establish policies, and appoint officers like CEOs and CFOs to manage daily operations.
Types of Corporations: S-Corp vs. C-Corp
C-Corp: Most common. Profits are taxed at the corporate level and again on shareholder dividends.
S-Corp: Passes profits/losses directly to shareholders’ personal tax returns.
Businesses can switch between C-Corp and S-Corp status, but it’s best to decide before incorporating.
Steps to Incorporate a Business
Ensure Legal Compliance: Check for required licenses and permits, especially in regulated industries like food or childcare.
Choose a Unique Business Name: Ensure the name isn’t already in use to avoid trademark issues. Include identifiers like “Inc.” or “Corp.” in your name.
Appoint a Registered Agent: A registered agent handles legal and official correspondence for your corporation.
Draft and File Articles of Incorporation: Submit this document, which includes your business name, address, and other key details, to the secretary of state. Filing fees range from $100–$500.
Write Corporate Bylaws: These outline your company’s operations, including shareholder rights, meeting schedules, and financial auditing processes.
Maintain Corporate Records: Keep vital documents like your Articles of Incorporation, bylaws, meeting minutes, and stock transactions securely stored.
Hold Your First Board Meeting : Adopt bylaws, elect officers, issue shares, and decide on a corporate seal.
Complete Final Steps
Apply for an EIN through the IRS.
Open a business bank account.
File any state-specific reports and pay fees.
For S-Corps, file IRS Form S-2553 within 75 days of incorporation.
Transitioning to a Corporation
Sole proprietors or partnerships can follow incorporation steps directly.
LLCs require additional legal steps, often involving attorneys, due to ownership structure changes.
Best State to Incorporate
Delaware, Nevada, and Wyoming are popular for their tax benefits and business-friendly regulations. However, if your business operates primarily in another state, you’ll still need to comply with that state’s taxes.
Note: This is not legal or accounting advice. Consult a professional for personalized guidance.