How to Start a Corporation

Starting your own Corporation is Easy


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11 Easy Steps to Start a Corporation 

Step 1: Choose the State

Depending on your area of business, target market, your and your partners’ current location, and other personal considerations, you can choose any of the 50 States and Washington DC to start your corporation. Besides, while choosing the location, you should also consider the cost of operating the business, facilities offered by the government, and the restrictions imposed by any government agency that can influence your business prospects. Some states are higher on the parameters of ‘Ease of doing business’ than others. Some others offer better facilities to operate an international business.

Step 2: Choose the Name

Every state has its corporate division that sets the rules to run a corporation including the rules to select the name of your corporation. Though there will be specific rules in every state regarding allotting the name yet some of the broad guidelines are usually common in all the states across the US:

  • The name of the corporation should be unique and should not resemble any other corporate name registered with the corporation registration office.
  • The name should also not breach the trademark of an already existing corporation.
  • To distinguish it from any other business entity, the name of the corporation should end with the word clearly defining it as a corporation. It can be either Corporation (Corp. in short) or Incorporated (Inc. in short).
  • The name cannot be any word that shows any link with the government agency or with any business restricted by the government for any reason. For instance, you cannot use the words Federal, United States, Government, and Reserve, etc.

The state-corporation office will help you in finding out the availability of your intended name. If available, you can pre-book the name of the corporation by paying a small fee until the time you submit the documents for the articles of incorporation. As soon as you file relevant documents, your company name will automatically get registered.

Step 3: Register the Corporation

In many states, registering the name is enough to register the corporation. This is particularly the case with small corporations. Some businesses don’t require any registration formality and you can carry out business with your name itself. However, not registering your corporate can bereave you of many tax and legal benefits. Besides, you may also not be protected from your personal liabilities. 

Step 4: Appoint a Registered Agent

You need to provide a Registered Agent who has a physical address in the state where your corporation has been registered and is available during normal office hours to receive and sign official and legal documents on behalf of the company. Though the address of the registered agent is provided in the state corporation office it cannot be used as an official address for business-related correspondence. The information of the registered agent is made public by many states.

Step 5: Elect Director

Directors are the main decision-makers in the policy and financial matters of the company. In the initial phase of company formation, owners appoint the directors to themselves. As the business opens, new directors are elected other than the owners, in most businesses. Some of the states allow for one director in a company, irrespective of the number of owners. Whereas some states require to have different numbers of directors depending on the number of owners.

Step 6: File Documents for Articles of Incorporation

The next step after appointing directors is to file ‘articles of incorporation’, also termed as ‘certificate of incorporation’ or ‘charter’ with the filing office of the respective state usually situated in the capital city of the state. Any or all the owners can sign the articles of incorporation. Those who sign the articles are referred to as ‘incorporator’ or ‘promoter’.

Step 7: Prepare Corporate Bylaws

The bylaws are the rules to operate the routine operations of a corporation. This includes rules related to the time and location of the mandatory or voluntary meetings of the board quickly of directors and the shareholders. Usually, corporation bylaws are drafted by the board of directors in their very first board meeting.  Many self-help services offer their assistance in drafting the bylaws, You can either take the help of these services or can hire a lawyer for the purpose. 

Step 8: Obtain EIN and Other Permits

Though the operational activities related to your corporation have already begun with the first board of director’s meeting and drafting of the bylaws yet you need to obtain relevant permits and licenses to start the business. The permits include the Employer Identification Number or EIN and Tax Registration Certificate from the Internal Revenue Service center of the district of your business etc.

Step 9: Receive Certificate of Authentication (if needed)

If your home country is not a member of the Hague Convention, it may need a Certificate of Authentication to accept each other’s documents. For the countries who are already members of the convention, the certificate is already available as Apostille. This certificate is required if you wish to open a bank account in your home country.

To receive your business-related mails at the US address you will require to outsource the services of a mail forwarding agency. The virtual office services may also be required if your banker requests a separate physical office address in the US. Many agencies offer these services with the option of weekly or monthly forwarding of mails. Besides, many of them may also offer you document tracking services, as well. Note that this address is different from the address of your registered agent.

Step 10: Obtain a US Phone Number

You can choose from the various options available for getting the US phone number. If you prefer the local phone number with area code, you can request any of the service providers to provide you the same. You can also choose a toll-free number for your business purpose.

Step 11: Open Bank Account

In the US

US bank account is necessary to receive US payments and to open a branch office in the country. Besides, it is also required to open a US merchant account. However, this is one of the more difficult tasks in the present US conditions due to many new anti-terrorism laws enforced for safety and security purposes. So, be prepared to wait for a long time and more formalities in opening the account. You may have to do thorough research to find out the right bank for you that can open your account quickly and with fewer formalities than others.

In Your Home Country

You can contact your home country bank to find out the necessary documents required to open an account. A certificate of authentication will be most likely required for the purpose, hence you can obtain that before-hand to save time.

US Merchant Account

To be able to accept credit cards and e-checks, you will require a merchant account from a US bank. To open the same, you will have to provide your US bank account details, physical US business address, and US phone numbers.

Step 12 (Nonessential): Design a Website

With the online platforms so prevalent in the modern business world, a basic website is necessary for the credibility of the company. Besides, having a website is also one of the pre-requisites now in getting a merchant account or dealing with a vendor. The good news is that getting a domain name is one of the easiest tasks and is available at a rather cheap rate. You can also include a professional and impressive logo on your website for an effective online presence.

Important activities to run and maintain your US corporation

It is pretty simple to run and maintain your US corporation. You only need to take care of the following easy to follow points:

Religiously filing Annual Report

It is a very simple process that can now be filed online in many states. The ‘Annual Report’ requires updated information about the owners of the corporation, addresses, and information about the registered agent. The registered agent will keep track of the due date and inform you before the due date for timely filing of the document. Failing to file the document may lead your corporation to become inactive. You may be levied with the late fees also. In the worst-case, your company can also be dissolved administratively and in the absence of no-response to the legal notice, you will also lose the laws suit filed against the corporation.

Keeping a Registered Agent

In the absence of a registered agent, you will miss important legal documents and correspondences from the state authorities. This situation can force you to miss the filing of the Annual Report and fulfilling other state legal obligations that can have very serious business and legal implications. To prevent such a situation, you must ensure that you maintain a registered agent at all times.

Complying With Your home Country Requirements

Though you are operating in the US, you will have different tax filing requirements in your home country. Ensure to follow all the local (home country) laws related to the business activities that you are conducting in the US. You can hire an expert as a consultant who has a thorough knowledge of all the relevant requirements in your home country related to operating the US corporation.

Pay Due Taxes in the US

Keep yourself aware of your tax liability based on various factors including your individual status with the country and also tax treaties signed between your country and the US. Consult a professional tax expert in the US, or take the help of the US tax advisor for the latest laws related to taxation and also consult the tax advisor of your home country who is aware of the laws related to tax in both the countries.

What is a Corporation?

Now, once you have decided that you have to start a Corporation in the US, it will be a good idea to have some basic and important information about the US Corporation. Right? So, read through a few bulleted points down here and you will have brief information about the corporation:

  • A corporation is a legal entity that is separate from the individual.
    What does this signify?
    It means that a corporation protects the owners from personal liability of a company. It also isolates individuals from the company’s debt.

How else can a corporation function separately?

There are many other activities also that a corporation can perform separately from the owner:

  • A corporation can make contracts, purchase real estate, raise funds by selling the stocks as a separate entity.
  • It can sue in the capacity of a corporation and can be sued in the same capacity without involving the owner as an individual.
  • The ownership of the corporation can be transferred via stock transfer, so the business through a corporation can continue irrespective of the ownership.
  • A corporation can get significant tax benefits that other legal business entities like LLC do not have.
  • A corporation will have a separate tax assessment through the corporation tax return. It won’t, in any way, be clubbed with the owner’s income and tax return.

Basic Structure of a Corporation

A corporation has a three-tier structure comprising:

  • Shareholders
    • Own the stocks.
    • Elect Directors
  • Directors
    • Collectively termed as “Board of Directors”
      • Include President, Vice President, Secretary, Assistant Secretary, Treasurer, and so on.
    • Appoint Officers
  • Officers
    • Run the routine operations of the company

Broad Rules for Operating a Corporation

  • In the beginning, when all the stocks of the company are with you and, you will be the 100% owner of the company.
    • So, during this phase being the only shareholder, you elect yourself as the director(s) and also appoint yourself as the officer. In the case of co-owners, all the owners can appoint different directors and officers among themselves.
  • You have to set in Corporate Byelaws as rules to operate the corporation.
    • The rules are subjected to modification with the change in the business environment.
  • It is mandatory to hold at least one meeting a year between the Board of Directors and the Shareholders at your preferred location.
    • You need to prepare the Minutes of Meeting mentioning the important company decisions.
    • You also need to comply with the Corporate Bylaws while conducting the meeting.

Types of Businesses You Can Start

You can select between forming two types of businesses in the US:

  1. Form a Limited Liability Company (LLC)
  2. Form a Corporation (Incorporation)
    1. C-Corporation
    2. S-Corporation

There are some important points to be noted:

  • In case any of the company’s owners are not US citizens, you can form a C-Corporation or an LLC.
  • If all the owners in the company are US citizens, you can start an S-Corporation.
  • The United States laws do not restrict you to form an LLC or C-Corporation based on the number of owners and their country of origin.
    • The US regulations also allow starting a company as an individual as well as a company.
    • However, your home country may have some restrictions on the type of US company that can run its operations in that country.
      • You can check with your law regulatory authorities or an attorney who is well versed with the laws of your country as well as the laws prevailing in the US.

For more information, check out the SBA for information regarding incorporation your business.

Final Words

The corporation is the oldest form of conducting business in the US. They are a little more difficult to manage compared to the LLC yet are the most prestigious form of business entity. Besides, the corporation also allows for more tax relaxation on healthcare, travel, and other expenses that other types of entities do not offer.

By following the systematic process of starting and running the corporation you can also make it pretty easy to operate with the advantage of having a lower tax burden.

To share with you all this information in the simplest way was the purpose of writing the article. We hope that the easy-to-follow step-by-step process described here will be helpful for you to start a corporation in the US.

Wish you good luck with your new venture!

Frequently Asked Questions (FAQs)

Q. How do I add a Shareholder, Director, or Officer to my Corporation?

A: Shareholders are included by buying stock in exchange for offering services or money in the corporation. The selling of stock has to be approved by the existing shareholders based on the Corporate Bylaws. Officers and directors are also added as per the method outlined in the Corporate Bylaws. 

Q. What is a Corporate Seal?

A: It is a mark of authorization and used in attesting a document. It is a hand-held device that can imprint the company name along with the year of stamping on the documents. Many banks and official departments demand a Corporate seal to open an account or as evidence of acknowledgment of receipt of documents, etc.

Q. How can I close my Corporation?

A: It is pretty simple to close or dissolve the corporation. As you had filed Articles of Incorporation to form a corporation, in this case, you need to file Articles of Dissolution to close the corporation. You have to take out the money from the corporation and return due amounts to all the shareholders. Finally, you need to inform about the dissolution of the company to the Internal Revenue Service center of the district to cancel your Federal Employer Identification Number (FEIN). You also need to notify all the relevant government agencies and stakeholders associated with the company about the closing down of the business activities.