Incorporating a US Business - Guidance
- Why Incorporate?
- How do I form a corporation or LLC in the state of my choice?
- What are Articles of Incorporation?
- What is a Certificate of Incorporation?
- What is a Charter?
- What information is required to prepare a Certificate of Incorporation?
Why Incorporate?
A well-incorporated and well-run company can limit the personal liability of its shareholders. Corporate assets may be at risk, but personal assets will generally be treated as separate. However, keep in mind that the Court does not automatically remove liability for criminal and negligent acts on the part of the company's officers, directors and shareholders.
Incorporation can help limit your personal liability as a business owner. In general, creditors of your corporation must satisfy their claims by seizing the assets of the corporation rather than your personal assets. In contrast, as a sole proprietor or partner in a partnership you are financially responsible for all liabilities of the business, and your personal assets are subject to seizure or lien by creditors.
Other benefits of incorporation can include greater tax deductions for health insurance and medical expenses, lower payments for social security tax and Medicare tax, and greater opportunity to raise capital for the business through the issuance of stock.
How do I form a corporation or LLC in the state of my choice?
The formation of a corporation or LLC is not a difficult process, and in most cases, it can be accomplished quickly and efficiently, as your agent, we will investigate the availability of your proposed corporate name and reserve it for you. Next, we prepare a Certificate of Incorporation. All state filing fees are paid through us to the appropriate state agencies.
What are Articles of Incorporation?
A Corporation's "Articles of Incorporation" is the main filing document which begins the corporation's existence under state law. Once filed, the corporation comes into existence.
The articles of incorporation declare the desire of an individual or group to become a corporation. It spells out certain minimum information about the corporation that is required by the laws of the state. It may also contain specific information about the corporation that needs to be made public record, like restrictions on the transfer of stock.
The level of complexity for a corporation's Articles of Incorporation can range from very simple to extremely complex. Generally, most jurisdictions require Articles of incorporation to contain, at a minimum, information about the Corporate Name, the Registered Agent, and the Corporation's business address. Requirements vary by state.
What is a Certificate of Incorporation?
The certificate of incorporation is what some states issue to evidence that yours is a valid corporation and has met state incorporation requirements. In some states, however, certificate of incorporation means articles of incorporation, the document that you file to incorporate your business.
What is a Charter?
The terms Charter, Certificate of Incorporation, and Articles of Incorporation are used interchangeably.
What is an Incorporator?
The incorporator is simply the person that files the articles of incorporation. The incorporator's duties and title end after incorporating.
What information is required to prepare a Certificate of Incorporation?
In addition to the name of the corporation and the address, you need to provide the director(s) name(s), the company address where the corporation will be located, and the number of shares of stock that you want authorised.
Do I need an attorney to form a corporation or LLC?
No. We provide all of the basic requirements for business incorporation and limited liability company (LLC) organisation. You'll also save many hundreds of dollars.
Do I need a special ending on my corporation's name?
In most states, your corporation's name must include an ending, such as "company", "corporation", "incorporated", "limited", "association", "club", "fund", "syndicate", "union" or the appropriate abbreviations (co., corp., inc., ltd., etc.).
What are Corporate Bylaws?
Bylaws are rules for the corporation that specify things such as the number of votes required to pass a matter put before the corporation, and the requirements to be met before a shareholder can sell his shares, among other things. Bylaws may not be changed without a majority of votes of the board of directors. Bylaws do not need to be filed with the State. They are created solely for the corporation and it's shareholders.
Does it matter where (in which State) I incorporate?
Generally, you should incorporate in the State where your office is physically located. If you incorporate in another state such as Delaware, you may need to submit an application to qualify as a foreign corporation in the State where you are located.
A number of years ago, there were some pretty motivating reasons why you might want to incorporate in States like Delaware and Nevada. However, times change and so do State laws. For companies that are privately owned (closely held), there are no substantive differences any more between the corporate laws of States. If you incorporate for the purpose of owning and operating a business, the general rule is that you should incorporate in the state where your main business office is located.
Can my Delaware corporation do business in my home state and other states besides Delaware?
Yes. In fact, nearly half of the corporations listed on the New York Stock Exchange are Delaware corporations. Many of these corporations conduct business throughout the US and abroad. They must, of course, conform to the laws of any jurisdiction they enter. Many states require that any foreign (out of state) corporation qualify to do business in their state.
What is a Registered Agent?
Although a corporation is a separate legal entity, it cannot physically receive documents, and therefore needs a real person to receive them on its behalf.
A registered agent is a person designated to receive legal notices, services of process, and other official documents delivered to the corporation. All corporations must have a registered agent on file with the Secretary of State. The address of the registered agent must a physical address, not a post office box. The person designated to be the registered agent may be an employee, officer, director, or shareholder of the corporation, or he may not be affiliated at all with the corporation. Additionally, the registered agent must be available during normal business hours.
The registered agent will forward these documents to the corporation at its principal office address. Corporations that operate in different states, but don't maintain offices in these states, use agent service companies to act as registered agent for them. The terms registered agent, resident agent, and statutory agent all have the same meaning.
Can you provide registered agent services in every state?
Yes. In addition to forming corporations and LLC's in all 50 states, we have a nationwide network of registered agents that can represent your corporation
What Is a C Corporation?
The IRS, not the state, classifies corporations according to how they want to be taxed. There are two types of corporations according to the IRS, either "C" corporations, named after Subchapter C of the tax code, or "S" corporations, named after Subchapter S of the tax code. C corporations have their own tax identification number and pay their own taxes.
What Is an S Corporation?
Just the opposite, S corporations, sometimes called small business corporations, are taxed as if they were not a corporation. Taxed like a partnership, an S corporation "passes through" its income or losses to the shareholder's personal tax return, and is not liable for Federal income taxes itself. The shareholders of an S corporation will pay personal income taxes based on the income of the S corporation, whether or not the shareholder received any of the income. Conversely, the S corporation shareholders will be able to personally enjoy any losses the corporation may have. You need to discuss this with your CPA.