Incorporate Business in USA
Incorporate business in U.S.
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Incorporate your business

How To Incorporate Your Small Business

If you have done your research, and you have determined that incorporation is the best approach for the organization of your small business (instead of a limited liability corporation or a partnership), there are very clear steps that you will follow to turn your business into a legal corporate entity. Here is an overview of those steps:

Selecting a Name For Your Business

The name you select for the incorporation of your small business must be approved by, and comply with the regulations that are enforced by the agency or department in your home state that oversees corporate filings. To locate the name and home page for this department in your state, search your state's ".gov" home page ("www" followed by your state's postal abbreviation, such as NY, and ending with ".gov"), or contact your county clerk.

This department will tell you how to search the state data base to determine if the name you have chosen is already in use. In addition, there are a number of other issues that you may, or may not need to address, depending on what your company does or sells. Start by searching for answers to this bulleted list of questions at your state's agency/department home page:

  • Understand the words that either cannot be used in a company name, or are regulated, such as National, Reserve, Federal, etc.
  • Determine if your company name infringes on another company's trademark.

  • Determine if your state incorporation automatically registers your company name, or if there are additional registration documents that must be filed.

  • Determine if your company name is considered a "fictitious" or "assumed" name, which will require a "fictitious business name registration."
  • Appoint Your Corporate Directors

    Corporate directors do not have to be company owners, but that is usually the case when you incorporate your small business. In many states a corporation is only required to have one director, but some states require that there be at least three directors.

    Directors authorize the issue of stock, select corporate officers, set salaries, approve loans, and more. They can be intimately involved in the daily business decisions of a small company, or they can leave all of those decisions to be made by the corporate officers. That all depends on how you structure your corporation.

    Write Corporate Bylaws and a Shareholder's Agreement

    Day-to-day operation of the corporation is spelled out in the corporate bylaws: voting requirements for directors and shareholders, when and how meetings will be held, etc. If the company directors will not simply be the owners/officers of your corporation, you may want to spell out the relationship that will exist between the directors and the owners/officers before you file for incorporation.

    When you incorporate your small business the entire stock of the business may be held by very few shareholders. For that reason, the transfer of stock ownership (and voting rights) is of particular importance. A shareholder's agreement specifies how stock transfers will be regulated in the case of the retirement or death of a shareholder, as well as when a shareholder wishes to divest of his or her stock.

    File for Incorporation

    As discussed earlier, you will file for incorporation at the department or agency that oversees such filings in your home state. Different states use different terms to refer to the filing process. The most common are "articles of incorporation," "certificate of formation," "certificate of incorporation," and "charter."

    Only one owner is required for incorporation. Multiple owners can all sign the filing papers, or they can appoint one owner to sign. Anyone who signs the incorporation articles is called the "promoter" or "Incorporator."

    At filing, you will also need to designate the corporation's "agent for service of process," also called a "registered agent." This person's full name and address are available to the public, so that there is a known individual who can be contacted as the corporation's official representative, in the case of a lawsuit or other legal action, for example.

    Hold an Initial Board of Directors Meeting

    This first meeting must take place in order for the official directors of the corporation to order the initiation of the final tasks that must be completed before your new corporation can begin doing business. This list usually includes, but may not be limited to:

  • Establishing the cycle for the corporation's fiscal year.

  • Official appointment of corporate officers.

  • Official adoption of corporate bylaws.

  • Official adoption of shareholder agreements.

  • Authorization to issue stock.

  • Authorization of a stock certificate and a corporate seal.
  • Issue Company Stock

    It is important to remember that when you incorporate your small business you are seeking to protect your assets by conforming to all legal requirements of incorporation. If you do not thoroughly fulfill those requirements at all times, your corporation could be ruled invalid. Such a ruling could be devastating in the case of a lawsuit brought against the corporation, because the suit could then be brought against the personal assets of the company's owners.

    Issuing stock is an essential requirement for incorporation. You will need to answer the following questions, and perform the listed tasks:

  • Does your company qualify for the SEC exemption from stock registration? This hinges on the issue of your stock being termed a "private offering."

  • Are you issuing stock to anyone defined as a "passive investor"?

  • How will shareholders pay for their shares.

  • How many shares will be issued to all shareholders.

  • Whether your state requires that you file a "notice of stock transaction" when you issue the actual stock certificates.
  • Document Your Corporation

    When you complete the process to incorporate your small business, it is time to obtain or reapply for any licenses or permits in the name of your corporation. It is also the time to apply for a new tax identification number.

    Take the time to make a complete transition from existing documentation that was in place for your privately held small business to new or rewritten permits, licenses and documentation that reflects your new status as a legal, shareholder-owned corporation. This will ensure that you will reap the full benefits and protections of your new incorporated status.

    Want more information about registering a company? Visit our Guide. Check out incorporation fees by each state.

    Tip: Did you know that Delaware and Nevada are top two incorporation states?

    Ready to register a company? Choose one of these great online incorporators:

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