question.jpgIn Business Law

How do I set up a corporation?

Every state has its own corporate laws, with its own requirements about what steps must be precisely followed for a corporation to be setup. For example, many states will let you set up a corporation that only has a single owner or that has a board of directors made up of only a single director, but some states will not allow this.

That said, when you are setting up a corporation (and as the person setting up a corporation, you are known as the incorporator) you would generally follow these steps:

1. Give some thought to how the corporation is initially going to be financed, because that may affect some of the later things you will do (although you would not really be locked into anything at this point and would obviously have some flexibility down the road, should your circumstances change).

2. Determine whether you will be hiring an attorney to help out in the incorporation process.

3. Figure out what state you are going to incorporate the business in.

4. Pick a corporate name.

5. Determine what type of a corporation you are setting up - a nonprofit corporation or a for-profit corporation. And if it is going to be a for-profit, you should further decide whether it will be a C corporation, an S corporation or a professional corporation. You should also decide if the business will be a close corporation.

6. Determine who is going to be the corporation’s registered agent.

7. Decide how the corporate stock is going to be structured, how much stock is initially going to be issued and how it is actually going to be issued.

8. Draft and file the articles of incorporation.

9. Determine the director structure - how many directors there are going to be and who the initial directors are going to be. The incorporator must then formally elect the directors.

10. Draft and approve the corporate bylaws.

11. Hold the initial directors meeting, addressing issues such as the designation and confirmation of the registered agent, approval of the stock certificates, designation of the corporation’s principal office, appointment of corporate officers, issuance of stock, etc.

12. Obtain a federal tax ID number (known as the employer identification number) for your corporation. You can obtain this number, which is essentially the business version of a social security number, from the IRS. It will be necessary to have this federal tax ID number to conduct many transactions on behalf of the corporation (opening a bank account, for example).

13. Issue stock certificates to the initial shareholders, making sure you are in compliance with state and federal securities laws.

14. Address any other legal requirements that might apply - for example, some states require corporations to make a filing with regard to their initial stock offering, or you may need certain business licenses, etc.