Corporation is one of the legal structures that is the most complicated to form and maintain. That is because the corporation requirements and processing is more tedious than sole proprietorship. While I maintained that it has several advantages like limited liability, ability to raise more capital and the like, the processing is much more complicated. You must understand the requirements and processes that you must undergo so that you know what to expect when putting up one.
Corporation Requirements and Processing
I have already mentioned some of the steps like picking a business name, making sure that the name is available, registering the corporation’s name, and picking the place where you want to put up your business, obtaining permits, filing of taxes, and choosing the directors that will represent your company. Now we will deal with some of the detailed corporation requirements and processing.
- The legal structure. You can choose from several business structures that are institutionalized such as the S-corporation, which indicates one level of taxation only, whereas the C-corporation has a double taxation where in the corporation is taxed on one hand and the shareholders on the other hand. Note that both corporations have different start-up costs and forms to fill out.
Image attributed to House of Facts
- Creation and signing of the Articles of Incorporation. The image above is an example of a Certificate of Incorporation. I have mentioned this in my past blog, but let me explain the importance of this. This contains your corporate charter, and it contains all information regarding your business. Some of it is your purpose, all information regarding your directors, limitation of liability of incorporators, stockholder’s information, special meetings for directors, and stockholders. State fees vary for the incorporation. You need to file your article of incorporation in your state. Fees are required for this.
- Creation of Corporation’s By Laws. This would state the roles and responsibilities of each director, officers, shareholders, and all those directly involved in the company. Included are the overall vision, mission and purpose of the company, and the business aspects and who manages them.
- The shareholder agreement. This is one of the most important aspects of corporation requirements and processing. This would address the responsibilities and rights of each shareholder that would include the ownership of stocks and the kind of valuation it has. Buy out-agreements are also stated in the document.
- File everything in your State. This is important because without filing your papers, you will never obtain the necessary permits and licenses in order to operate your business. Different states require different systems and processes and you must be familiar over how this is done.
Some Practical Matters
Some of the corporation requirements and processing would be opening of your bank accounts. This must be separate from your bank account, and must bear the name of the corporation. Schedule your first board meeting to discuss matters that concerns your company. This may include issuance of stock certificates, operation of the company, finances, marketing, and the like. Lastly, hire a lawyer to check all your documents and to see through if your systems and processes are all in order. This will prevent any legal issue that might arise while operating your company.