Incorporate

A corporation is a legal entity that exists separately from its owners.  Creation of a corporation occurs when properly completed articles of incorporation are filed with the correct state authority, and all fees are paid.

 

All corporations start as "C" corporations and are required to pay income tax on taxable income generated by the corporation.  A "C" corporation becomes an "S" corporation by completing and filing federal form 2553 with the IRS.  An "S" corporation's net income or loss is "passed-through" to the shareholders and are included in their personal tax returns.  Because income is NOT taxed at the corporate level, there is no double taxation as with "C" corporations.  Sub-chapter S corporations, as they are also called, are restricted to having fewer than 75 shareholders, who must be individuals (S corps cannot be owned by other corps) who are not nonresident aliens.

 

No, but it is highly advised.  Having an attorney is not a legal requirement to incorporate, except in South Carolina (a signature by a SC attorney is required on articles of incorporation).  In all other states, you can prepare and file the articles of incorporation yourself; however, you should be thoroughly versed in the laws of your sate.  If you make mistakes here, you may jeopardize your whole net worth!

 

A good corporate attorney can be a valuable resource to your small business.  If you are unsure of what steps your business should take and you don't have the time to research the matter yourself, even the cost of one hour's consultation can pay off handsomely later.

 

Generally, incorporating without the help of an attorney is not recommended unless the corporation is for extremely small business needs.  I can refer you to attorneys whose fees are fair and reasonable.

Helpful Articles

How do I name my corporation?

First, we recommend that you spend some time coming up with a name for your corporation.  Although each state has different rules concerning the naming of your corporation, the most common rule is that it must not be deceptively similar to another already formed company.  The corporate name must include a suffix.  Some examples are "Incorporated", "Inc.", "Company", and "Corp."  However, your state may have different suffix requirements.

 

What are the benefits of incorporating?

The primary advantage of incorporating is to limit your liability to the assets of the corporation only.  Usually, shareholders are not liable for the debts or obligations of the corporation.  So if your corporation defaults on a loan, unless you haven't personally signed for it, our personal assets won't be in jeopardy.  This is not the case with a sole proprietorship or partnership.  Corporations also offer many tax advantages that are not available to sole proprietors.

 

Some other advantages include:

• A corporation's life is unlimited and is not dependent upon its members.  If an owner dies or wishes to sell their interest, the corporation will continue to exist and do business. 
• Retirement funds and qualified retirement plans (like 401k) may be set up more easily with a corporation.
• Ownership of a corporation is easily transferable.
• Capital can be raised more easily through the sale of stock.
• A corporation possesses centralized management.

Most every state requires that a corporation have a registered agent.  That agent must have a physical location in the formation state.  The registered agent can typically be any person (usually a resident of the state) or any properly registered company who is available during normal business hours to receive official state documents or service of process (lawsuit).

 

Most states allow for one person to act as shareholder, director, and all officer roles.

 

Your corporation is required to have an Employer Identification Number (EIN) also known as your Federal Tax Identification Number so that the IRS can track payroll and income taxes paid by the corporation.  But, like a social security number, an EIN is used for most everything the business does.  Your bank will require an EIN to open your corporate bank account.  Call us and we can help you obtain an EIN number.

 

You must have your initial shareholder(s) meeting to elect your director(s), if your director(s) haven't been disignated in the articles.  Then, you must have your initial organizational meeting of your directors.  At this meeting, you will need to elect your officers, adopt your company's bylaws, and issue your stock (among other actions.)

Annually, the corporation needs to re-elect oficers and meet to approve transactions in excess of management's authority.  Do not forgo the annual meeting.