What is Incorporation?
Incorporation is the process of preparing certain documents, including a document referred to as the “Articles of Incorporation,” and the filing of the document with the Secretary of State. If forming an LLC, the document used is referred to as the “Articles of Organization.”

What is Corporate Formation?
It’s a synonym for “Incorporation.” It’s the process by which a corporation or LLC becomes officially incorporated.

What do I need to know before I Incorporate?
Before you incorporate, you need several pieces of information. You need to know where you would like to incorporate (which state), your choice of corporate form (S-Corp or C-Corp, or LLC), an official name for your company, the companies address, and the name and address of your company’s resident agent.

For a C-Corp or S-Corp, you will need to decide how many shares the corporation is authorized to issue. For an LLC, you will need to choose the type of management (manager-managed or member-managed).

What state should I incorporate in?
You will need to choose what state to incorporate in. This is a very important decision because it will be the company’s legal home. However, the legal home doesn’t have to be the company’s physical home. A company can operate and carry on all of its business in a state other than the state of its incorporation. However, it usually boils down to incorporating in the state of its operation, Delaware or Nevada.

What is a Corporation?
A corporation is an entity that is separate from the owners of the business. To become a corporation, you must incorporate with the state. The two basic types of corporation are S-Corps or C-Corps.

What is an LLC?
An LLC (Limited Liability Company) is similar to a corporation in that it is separate from the owners of the business and are entitled to limited liability. An LLC is favorable in some instances because it entitles the owners to limited liability and avoids the “double taxation” of a corporation. Although an S-Corporation also affords these same benefits, an LLC has less stringent corporate formalities, management flexibility and relaxed ownership qualifications.

How does an S-Corporation differ from a traditional C-Corporation?
An S-Corporation is similar in structure to a C-Corporation, however it is not subject to double taxation. The profits of an S-Corporation is taxed at the individual level, whereas the C-Corporation is taxed at the corporation, as well as the individual level.

A C-Corporation is formed when you file the Articles of Incorporation with the Secretary of State. An S-Corporation is created when you elect to create one with the IRS.

What is Double-Tax and How do I Avoid Paying It?
One major disadvantage of a C-Corporation is its double taxation. It’s called double taxation because its profits are taxed once at the corporate level. and then taxed again at the individual level when the distributions are made.

Neither the S-Corporation nor the LLC is subject to the double taxation rule. They are only subject to the taxation the individual level – not the corporate level.

What is a Resident Agent and do I need one to incorporate?
To incorporate in any state, you must appoint a registered agent. This person is designated by the corporation to receive important legal documents on behalf of the corporation. This agent must be a resident of the state of incorporation. To incorporate in Nevada, you must have a registered agent in Nevada. This agent must also have a physical address – in other words, they may not use a P.O. Box address.

Can a Corporation or LLC have only one owner?
Yes. Most states allow a corporation or LLC to have one owner.

Aside form Incorporation, are there other legal requirements I need to abide by before I transact business?
EIN – Employer Identification Number:

Before your company transacts business, it will need an employer identification number (EIN) from the IRS. Our firm also provides services in obtaining such identification number.

License Requirement:

Before transacting business, some state require you to obtain a license and possibly pay a state fee. Additionally, the city in which you transact business may require you to obtain a license and pay a city licensing fee.

Corporate Formalities:

Corporations and LLCs are require to abide by certain corporate formalities. See below for such formalities.

Do I need to incorporate my business?
Ultimately, it is your decision to incorporate your business. We may give you our opinion as to whether it is best to incorporate, and the advantages and disadvantages of incorporating. However, the ultimate decision is yours.

One of the most important reasons to incorporate is to shield yourself from personal liability. If you are not incorporated, creditors may sue you personally and reach your personal assets (i.e., personal residence, bank accounts). Generally, if you incorporate, creditors are unable to reach these assets.

There are other reasons on why you should incorporate: personal image, perpetual existence of the corporation, and tax advantages.

Can I change the form of my business at some later date after I incorporate?
The short answer is YES. If you have an LLC, you may incorporate in to an S or C Corporation and vice versa. However, there are certain requirements that must be fulfilled – i.e., shareholder approval.

What is an EIN and do I need one to incorporate?
Every new Corporation or LLC needs an Employer Identification Number. An EIN number is similar to a Social Security Number if you were to tranact business as an individual. You don’t need one to incorporate, but you must obtain one after incorporating. We assist clients obtaining their employer identification number.

Specifics About Incorporating
What should I name my corporation?
The name of your corporation can be as wild as your imagination. The only requirement is that it must be distinguishable form other corporations. Prior to filing the articles of incorporation, we do a preliminary name check to see whether your name is already taken.

What if my company doesn’t have an address yet?
The official company address must be a physical address – not a PO Box. However, if you have not already rented office space, you may set your address as your home address.

What is a Board of Directors?
They are the decision making authority of the corporation. They delegate authority to the officers of the corporation, but maintain power to oversee the operation of the corporation. Directors are usually appointed by shareholders.

There is no requirement that directors, officers and shareholders be different people. Shareholders can be directors and officers. In small corporations, the shareholders are usually the directors and officers.

What are Corporate Shareholders?
Shareholders are considered the owners of the company. The Directors and Officers work to better serve the shareholders. Although the corporation is liable for the debts of the corporation, shareholders have limited liability – it is limited to the amount the invest in the corporation.

What are LLC Members?
A “member” is an owner of an LLC (Limited Liability Company), much like a corporation’s shareholder.

Do the Board of Directors and the Shareholders have to be different people?
No. They are often the same in smaller corporations.

What are Articles of Incorporation (AOI)?
Articles of Incorporation are the main documents used to incorporate. These articles are filed with the secretary of state.

What are Articles of Organization?
Articles of Organization are the main documents used to form an LLC. These articles are filed with the secretary of state.

What are Corporate Formalities?
To continue recognition as a corporation or LLC, the corporation/LLC is required to abide by certain “corporate formalities” and to keep accurate records of its activities. There are three distinct corporate formality requirements: Corporate Records Requirement, the Annual Reporting Requirement, and the Meeting Requirement.

Corporate Records Requirement:

The corporate records requirement compels Corporations and LLCs to maintain certain corporate records at its principal office. These records include the Articles of Incorporation, the Corporate Bylaws (Operating Agreement), Minutes of shareholder and director meetings, written communications b/t shareholders and the corporation for the past three years, the corporations stock transfer ledger, names and address of shareholders, directors and officers, most recent annual report, and financial records for the past three years.

Annual Reporting Requirement:

Corporations and LLCs must file a statement and pay a moderate fee on an annual or biennial basis. This filing requirement, which is generally referred to as an “Annual Report” or “Franchise Tax,” updates the state government as to the status of the company, and permits the company to continue in existence.

Meetings Requirement:

Once the corporation is formed, the organizational meeting is the official meeting that must be held after incorporating. There are two types of meetings that a company must hold on a continuing basis. The corporate shareholders (or LLC members) are entitled to at least an annual shareholder meeting and the board of directors (or LLC board of managers) is required to hold periodic meetings throughout the year.

What is an organizational meeting?
Once the Articles have been filed, and the business is officially formed, the company should hold an organizational meeting. All directors, officers and shareholders should be attending. At this meeting, those attending lay the foundation of the company’s operation. It’s a synonym for “Incorporation.” It’s the process by which a corporation or LLC becomes officially incorporated.