If you’ve realized that the benefits of forming a corporation for your business outweigh continuing to operate as a sole proprietor, congratulations. You’re about to take your business to the next level.
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Now, many people assume that incorporating a business is a difficult process. It’s actually not, but you do have to make sure you’re doing everything you’re supposed to so that your application for incorporation is processed without a hitch.
Step 1: See If Your Business Name Is Available
When you incorporate in a given state, you need to know that the name you want to use for your business isn’t used by anyone else. If it is, you’ll have to change yours slightly or choose a different state to incorporate in. Conducting a name search will let you see if you can proceed to file your incorporation paperwork under the name you want.
Step 2: Draft Your Articles of Incorporation
This document might be called something different, depending on the state you decided to incorporate in, including:
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- Certificate of Incorporation
- Articles of Organization
- Certificate of Organization
Whatever it’s called, it’s an essential document to get your corporation up and running. You’ll need to fill in details about the nature of your business, its Board of Directors, contact information, et cetera.
A note on your Board of Directors: if you are the only person in your business, it’s fine for you to be the sole Board member. But keep in mind: having a Board of Directors can help provide you with expert advice that can help your business grow.
Step 3: Submit Your Documents
Depending on how quickly you want your incorporation paperwork to process, you’ve got a few options here. If you don’t mind waiting up to three months, you can file the paperwork yourself with your Secretary of State office. If you want it faster (maybe you want to start your fiscal year as a corporation to keep things nice and clean), you can work with a document filing company who can rush your filing as fast as an hour.
Step 4: Apply for an EIN
As a corporation, you will need an Employer Identification Number. This number is kind of like a social security number for your corporation, and will be used when you file taxes and business documents of all kinds. You’ll also need it to open a business bank account.
Step 5: Draft Your Bylaws
Another document you’ll need for your corporation is your bylaws. Whereas your Articles of Incorporation provides basic information on your business, this document will cover how you will run your business day-to-day. This includes:
- How your Board of Directors will be elected, and how frequently
- How and where meetings will be held
- Duties of officers or Board members
Step 6: Take Care of Business Permits and Licenses
If you’re starting your business from scratch, you’ll also need to check with local regulators to ensure that you’ve got any business licenses or permits you need to operate, including your sales tax certificate if it’s required in your state.
After You’re Approved
Once you get your corporation paperwork back, you’re officially a corporation! If you want to issue shares, you can do that at this point. If you want to seek funding from investors who require you to be incorporated, you’re now eligible.
You’ll need to stay on top of your corporation paperwork to remain compliant year after year. On the anniversary of your filing, you may need to submit an Annual Report and possibly pay franchise tax fees, otherwise you risk being charged a penalty fee and being noncompliant with your state.
You should also keep Minutes at each Board meeting to have an accurate record of all business decisions the Board makes.
If you didn’t have a business bank account before you incorporated, it’s essential that you have one now. You’ll need to ensure that you’re keeping accurate accounting details now that you’re a corporation.
Nellie Akalp is a serial entrepreneur and small business expert. She currently serves as the CEO of CorpNet.com, an online legal document filing service, where she helps entrepreneurs start a business,incorporate, form an LLC, and offers free business compliance tools. Connect with Nellie on Google+.
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