Requirements for forming a company vary slightly from state to state, but generally the following steps should be followed:
1. Select your company name
Choosing a business name is the first important step in forming a corporation. Your business name must be different from the names of existing businesses in your state. You can search online for name availability on her website for the Secretary of State or other state agency responsible for business filings. Each state office has specific rules regarding business names, and you must follow the rules of your state's corporate division.
In general, here are some guidelines that generally apply.
- The business name must include an entity identifier such as “Incorporated” or “limited.”
“Corporation”, “Company”, or abbreviation such as “Inc.”, “Co.”, “Ltd”, etc. - Company names should exclude words such as “trust,” “bank,” “credit union,” and “fiduciary,” or words related to government agencies such as “FBI,” “State Department,” and “Treasury.” .
2. Appointment of initial directors
The board of directors oversees the overall direction of the company, or the “big picture.” Incorporation requires the appointment of an initial board of directors, but this temporary board can be replaced by a more permanent board after incorporation.
Different states have different requirements for the number of people who need to be on the board. You may need just one board member, or you may need three or more.
3. Submission of articles of incorporation
To form a new corporation, a legal document called articles of incorporation is filed with the state's business filing agency (usually the Secretary of State). In most states, you can complete this process online. Requirements may vary by state, but articles of incorporation typically include:
- your corporate name
- Main office
- its purpose
- Name and address of the registered agent who will accept legal document service on behalf of your business
- Names and addresses of incorporators and/or initial board members
Your best bet is to find out what documents are required for articles of incorporation depending on your specific state. Each state has different requirements, terminology, forms, and filing fees.
Once the article is approved, a certificate of formation will be issued.
4. Draft internal articles of incorporation
Some states have corporate regulations that allow a company to be legally recognized as a corporation. A company's articles of incorporation are a company's rules and regulations that outline how the company operates. You can draft articles of incorporation before or after filing your incorporation documents.
A company's articles of association provide a roadmap for how the company will operate and how decisions will be made.
These bylaws must include:
- Roles assigned to each officer
- How are business decisions made?
- When and where will the annual general meeting be held?
- Percentage of shareholders required for decision making
- Where and when dividends are paid
If you need help drafting this legal document, we recommend consulting with a corporate attorney. You can find templates online, but be sure to check with your specific state to find out what needs to be included.
5. Holding the first board of directors meeting
Once your corporation is officially formed and your bylaws have been drafted, hold your first board meeting. Be sure to follow the notification guidelines in your bylaws. At this meeting, the directors typically appoint the executive board, approve the bylaws, appoint officers to carry out the day-to-day operations of the company, establish the company's fiscal year, and approve the issuance of stock. Minutes of all board meetings must be recorded and kept in the company's records.
6.Issuance of shares
Issuing shares to shareholders is one of the first formal corporate actions after forming a joint stock company. Record the shares issued to each shareholder and the price paid.
Shares of stock represent ownership units. Corporations are owned by shareholders, who make contributions to the corporation in order to acquire stock. The authorized number of shares is the maximum number that will be issued for sale. The number of authorized shares is stated in our company's articles of incorporation.
Although small businesses are exempt from many Securities and Exchange Commission (SEC) regulations regarding stock issuance, small businesses should seek advice from a small business attorney to ensure compliance with all regulations when issuing stock. It is recommended.
7. Draft a shareholder agreement
Although shareholder agreements are optional, they can greatly contribute to the long-term success of your business.
A shareholder agreement is a contract between the owners of a small business. This determines how ownership will be managed if a shareholder dies, retires, becomes disabled, or leaves the company. Signing a shareholder agreement in the company's early stages helps ensure business continuity and avoid future disagreements.
It is best to enlist the help of an experienced small business attorney who can tailor your shareholder agreement to your company's unique needs.
8. Obtain an Employer Identification Number
An Employer Identification Number (EIN) allows the IRS to identify your business for tax filing purposes. This is similar to a social security number, but for business purposes.
Businesses must obtain an EIN, and an EIN is also required to open a bank account, set up payroll withholding, and set up a state tax account. You can obtain an EIN quickly and for free on his IRS website.
9. Obtain business permits, licenses, and DBAs
Most businesses require some type of business license or permit, but business requirements vary depending on your location and the industry you work in. Some states and many local governments require all businesses to obtain a general business license. Many industries, such as alcohol and firearms sales, aviation, and restaurants, require additional licenses.
The Small Business Administration (SBA) has a table of industries that are eligible for federal licensing. Check with your state and local government for additional licenses required in your area.
If you do business under a name other than your legal entity's legal name, you must also register your DBA name. A DBA name is also known as a “business name” or “fictitious business name.” Depending on where you live, you may need to register your DBA with your state, city, or county. If your business only uses its legal legal name, you can skip this step.
