Many successful business owners manage corporations. They began by learning how to set up a corporation and understanding what exactly the business entails. The term refers to legal entities that remain separate from their founders. Unlike other types of business entities, corporations act as people. When an issue arises, corporations face the challenges. Their owners avoid personal liability. Several entrepreneurs prefer this operational approach, but do not know how to incorporate. Read this post to learn how to set up a corporation business legally.
Register A Business Name
Begin setting up your corporation by registering a business name. Choose a name that reflects the type of company you plan to start. Startups entering the restaurant industry need food-focused names. Entrepreneurs launching new spa businesses need names that reflect their services. Once you choose a relevant name for the industry you plan on entering, review your state’s corporation name guidelines. Many states require corporations to end in Inc., Corp. or LTD. They also prohibit non-governmental organizations from using federal terms such as National and Reserve. Keep these rules in mind as you register your business name. Then, you can proceed in setting up a corporation business legally.
Select A Corporation Type
After you choose and register an unused business name, select a corporation type. Common types of corporations include C corp, S corp and B corp. These variations require different tax forms. They also maintain varying operational guidelines. Thus, choosing one is essential to setting up a business legally. Entrepreneurs who start C corps receive the most legal protection, but pay income tax. S corps avoid double taxation that C corps face. Moreover, benefit corporations (B corps) operate based on mission and profit. However, their tax requirements are the same as C corporation requirements. Choose the most beneficial type of corporation for you to continue launching your startup.
Next, appoint directors for your corporation. This step in setting up your business entails finding individuals to handle your finances. On top of making financial decisions, directors also manage policies. They take care of corporate stocks, officer salaries and loans on behalf of the business. Since they take care of crucial financial elements, they play a major role in a corporation’s success. Thus, you need to appoint trustworthy, knowledgeable individuals to take on the positions. Explain your core values definition to each candidate to see if they resonate with them. Many entrepreneurs take on the role themselves to remain in control. Determine whether you want the responsibility or not to start a corporation legally.
File Articles Of Incorporation
Once you appoint directors, move on to file articles of incorporation. You need your directors’ names along with other business information to complete the forms. These forms include several corporate terms that many entrepreneurs are unfamiliar with. Consider hiring a business lawyer to assist you in completing them. They can also work with you to file your articles in the proper way. Then, you can get your business up and running faster. More so, you can learn how to set up a corporation legally.
Open A Corporate Bank Account
In addition to the above steps for setting up a corporation, open a corporate bank account. This type of business requires you to keep your personal finances completely separate from your business finances. Therefore, you need to set up a business account that does not link to your personal one in any way. Use a business credit card for all corporation expenses. Most banks require specific documents to open a corporate account. These documents typically consist of a copy of your articles of incorporation and a corporate resolution. They also usually demand a corporation EIN number. Take these materials with you to visit your local bank. Fill out the necessary forms for opening a corporate account. With a separate account, you can finish setting up your corporation in accordance with the law.
Corporations offer business owners a higher level of personal protection. To form one of your own, select and register a business name. Then, choose between C corp, S corp and B corp. Appoint directors to manage your finances and policies as well. Hire a lawyer to assist you in filing articles of incorporation. Finally, open a corporate bank account to keep your business capital separate from your personal finances. Follow these steps to learn how to set up a corporation legally.