A corporation is the most complex, and most expensive, business form but it offers unique advantages over other business forms. Once you have decided to utilize this business form you should immediately consider hiring an attorney to help you through this process. The main steps associated with forming a corporation are, choosing a state, choosing a name, appointing directors, filing articles of incorporation, creating corporate bylaws, holding a directors meeting, creating and issuing stock, and obtaining licenses and permits.

A corporation can be formed in any state. Deciding which state is a difficult decision but most small businesses should incorporate where there business is located. The state of incorporation does not have to be where the principal pace of business will be located. Many decide on where to incorporate based on the laws of that state. For example, Delaware is the most popular state for incorporation because its laws are friendly to incorporation such as lower incorporation costs and lower disclosure requirements. This does not mean you should automatically choose Delaware as other states, in an attempt to attract incorporation in their own state, have adopted similar rules that appeal to businesses. However, there are additional costs associated with filing in a different state. One of which that you will likely face is the Certificate of Authority for foreign corporations. A foreign corporation is any corporation whose principal place of business is not in that state. Another factor to consider is that even if you register out of state you will still have to register for operation in your home state and pay income taxes there. Finally, you are availing yourself to lawsuits in that foreign state, which take more resources like out of state attorneys or having you or your employees appear there. Considering these factors, for small businesses, registering in another state may not be the right option.

In choosing a name for your corporation it can be nearly anything, as long as it complies with your state’s rules. One requirement is that the name must end with the words limited, Ltd., corporation, corp., Incorporated, or Inc.. Another is that the name should not contain any words that could mislead someone into thinking the corporation is affiliated with the government or a restricted type of business, such as bank, Federal, or National . Finally the name must be one that is not already registered in that state or is not violating a federal trademark. A lawyer can help you with this process to ensure that your name is available and complies with these rules and others. You can sell your products under a name different from the name you incorporated under but it must comply with the same rules. This other name is called a fictitious or assumed name and must be registered in the state or county where the business is being operated. If you use the same name the name is usually registered as apart of the incorporation process.

Articles of incorporation are fairly simple and state things like the agents In different states this may go by the name charter, or certificate of incorporation. Default forms are generally provided by your state. Your attorney will be able to create articles of incorporation that are specific to your needs. Filing the articles of incorporation also has a filing fee which can be as high as $800 and varies by state.

The day to day operation of the corporation are decided by its directors such as setting salaries, approving loans, and selling stock. The minimum number of directors required will vary based on the state. If there is only one owner it is possible to have only one director. In many small business the shareholders and the directors are the same people. Next you must create the corporate bylaws. The corporate bylaws will specify the rules of daily operations, such as when directors meetings will be held. The corporate bylaws must be signed by all of the owners. At the first meeting of the creditors, in addition to adopting the bylaws, the stock is issued, bylaws are adopted and fiscal year is set.

All corporation must issue stock to their owners. Registering stock is a time consuming and expensive process that requires extensive hours from both attorneys and lawyers. However, there are exemptions on whether they have to be registered. For small businesses with few owners, most states will allow these businesses to be exempt from this requirement. If you have passive investors, investors who are only owners and aren’t actively involved in the operation of the company, having an attorney is essential. This is because a corporation with passive investors has additional state and federal laws to comply with.

The final step, obtaining licenses and permits, is the same as that required of any business and involves the permits associated with your business type. This will vary depending on the business you want to run. Having an attorney can streamline this process because they are familiar with the requirements of many types of businesses.

Forming a corporation is the most complex business form and as such you should hire an attorney to help you through the process. An attorney will have the resources to allow you to incorporate in different states in addition to being able to handle the creation of necessary documents like the articles of incorporation. Having an attorney is a useful resource for any of your questions regarding the formation of a corporation.