5 Steps To Forming A Corporation To Protect Your Business

Forming a corporation is a smart way to start a company. A corporation not only lets a small company locate new investors without changing their corporate structure but also protects those investors’ personal finances if the company fails. As a would-be business owner, forming a corporation could protect and expand your business now and in the future. Forming a corporation can be expensive and complicated. However, by following a few steps, you can get through the process without trouble. Here are the steps to forming a corporation.

Pick A Name

You should first pick a name for your corporation. The name in question needs to follow guidelines set forth by the federal government and the choice of your best state to incorporate in. Your corporation name can’t be the same as an existing corporation. Your name must also end with a corporate designation, such as “Corporation” or “Incorporated.” It also cannot have language in it that identifies your corporation as government backed or as a more controlled economic entity. For example, you cannot use the words Federal or Bank in the name. Picking the right name for your corporation is important for both marketing and legal reasons.

Choose Directors

You need to name directors to run the corporation. You should be one of those directors, as well as any other investors or partners you have at this stage. The number of directors you need will be determined by the state you found the corporation in. These directors will oversee day to day operations and protect the investments of you and your investors. As a result, take pains to ensure you hire experienced leaders to serve as directors.

File Articles of Incorporation

To formally found your corporation, your and your directors should now write and file articles of incorporation. This is a formal document sent to the state you incorporate in. The state will provide you with a template for this section. It will give the state general information about the business structure. You will also have to name an agent to be the point of contact between the corporation and the state. Additionally, at this point you will have to pay a filing fee and acquire any other state and federal permits you need to perform your business. After all this is accounted for, the state will send you a certificate of incorporation. With that, you are legally able to do business as a corporation.

Write Corporate Bylaws

To make the corporation function, you will need to draft corporate bylaws. The corporate bylaws will establish how the corporation will be structured and run. It will establish which directors oversee which departments and the chain of command between them. Additionally, the bylaws will establish best practices for the business and outline long term goals. It is important to have these bylaws, and make sure they are clear. This document will be the core of the corporation.

Sell Shares

With the corporation setup, you must now find shareholders to fund it. To do this, your corporation will issue shares, or parts of the company. Interested investors by these shares and you use the money to fund the corporation. This comes down to marketing the company and convincing investors that their shares will increase in value. It’s also important to make sure, what ever number of shares you produce, that you and your partners maintain 51% of the shares. Without that, you could lose control of the corporation like Intuit stock. Shares make it easy for new investors to provide capital. It also means much of your job becomes maintaining their interest.

Founding a corporation can be accomplished by following these simple steps. Name your corporation, following federal and state guidelines. Hire directors to help run the corporation. File articles of incorporation and obtain a certificate of incorporation. Write corporation bylaws to manage your company. Issue stock shares to attract investment. With these steps complete, your corporation is founded and ready to make you money.

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