Starting a new business requires a lot of planning and hard work. One of the most important decisions you will make in the early stages is choosing a business structure such as a sole proprietorship, partnership or corporation. Launching a corporation has many benefits over other choices such as more enhanced legal and financial protections for founders. However, before you embark on this choice, you should know the legal process required to form a new corporation.
Get a Registered Agent and Articles of Incorporation
Something every corporation must have to be created is a registered agent. This is a person or another corporation that will have to accept legal notice if you end up being sued or have some other legal action taken against your new corporation. The agent must be registered in the state you wish to introduce articles of incorporation in. These articles are used to set up the structure of the new corporation. Each state has different rules for articles of incorporation, and these articles must be approved by the state.
Keep in mind that the technical processes used to form new corporations can be helplessly complicated. It’s not something you should try to tackle on your own as a new business owner. Mistakes made with filing paperwork alone can throw a monkey wrench in the entire process. Overall, it’s probably best to work with professionals from a company that has had experience forming corporations with many clients over the years. Seek out professional corporation forming services that can handle the technical aspects of forming your corporation so you can focus on the bigger picture of your long term business strategies instead of stressing out over whether or not you followed every obscure rule correctly.
Drafting Bylaws and Appointing Directors
Another important component of this legal process will be the creation of the bylaws that are used to regulate how the company will operate after its formation. While not every state requires bylaws, it’s foolhardy to not create them. You will also need to appoint directors at this stage. The board of directors will in essence govern the company. How they do so will be determined by the company’s bylaws.
One of the things that makes a corporation very different from a sole proprietorship or a partnership is that the company can be jointly owned by multiple entities through the issuance of stock. At the corporation’s formation, this stock will be exchanged for things like cash, property or other assets used to create the company’s operations to get it up off the ground. Later on, stock can be offered to the public via a public offering and may end up being traded on a stock exchange if certain requirements are met.
While these are the major steps to starting a corporation, there are of course other things you must do and forms you must complete to finish the process. This can include the submission of forms to the IRS and your secretary or state, obtaining an employer identification number and more. Overall, work with professional corporation forming services to ensure that each step is completed properly. If you are too lax with the process or get in over your head, you could end up making significant mistakes.