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How to Start (and Keep) a C-corporation[1]

Formation and Other Required Formalities: 13 Steps

1. Name:
Select a unique corporate name. [2]  Search your state’s corporate and limited liability company (LLC) databases.  Your corporation’s name must generally be distinguishable from any other corporate or LLC name recorded, registered, or reserved in your state.  You may additionally want to search your state’s limited partnership database, do a general online search, search your local fictitious or assumed name database, and search state and federal trademark databases.  A domain name search may also be helpful.

If necessary, take any steps required to reserve or protect your chosen name prior to organization.

Your corporate name must generally contain the word “corporation,” “incorporated,” “company,” or “limited,” or an abbreviation of one of these words.  It must generally not contain certain words that indicate authorization to conduct business within restricted industries.  Please consult your state corporation act.

You may generally adopt and register an assumed name.  Consult your state’s business corporation act and regional rules to follow and comply with all requirements and procedures.

You may also register your business name as a state or federal trademark.  This is a good idea, but not a requirement.

2. Registered Agent and Office:
Determine who will serve as your corporation’s registered agent, and note the address of that “person’s” office.  Your registered agent is a person upon whom all process (any legal document which must be served on the corporation and to which it must respond) on the corporation may be served.  Your agent must agree to act as your agent.  You will name the registered agent and office in your articles/certificate of incorporation to provide a public record of a person upon whom process may be served.

Your state of incorporation may require that your agent reside, and their office be located, in state.  Please consult your business corporation statute regarding applicable requirements.

3. Shares of Stock:
Determine the number and classes of shares your corporation will authorize and issue, and any related share preferences, designations, qualifications, rights, requirements, and restrictions.  You will likely note these in your articles/certificate of incorporation.

4. Directors:
Determine who will serve on your board of directors.  Your corporation must have a board of directors to manage the business.  Your directors will make all major decisions regarding corporate direction and management.  Your state may require that you name initial directors in your articles/certificate of incorporation.  Regardless, you will need to elect or appoint your board of directors at your organizational meeting (a necessary legal step in forming your corporation, outlined below).

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5. Articles of Incorporation (or Certificate of Incorporation):
Execute and file your articles/certificate of incorporation with the Secretary of State in your chosen state (along with any required filing fees).  Required data varies by state.  Your articles/certificate must generally include such information as:

  • 1. Your corporation’s name;
  • 2. Your corporation’s business purpose;
  • 3. The name of your registered agent and address of your registered agent’s office;
  • 4. Data regarding the initial authorized and issued shares of stock;
  • 5. Names and addresses of incorporator(s) and initial director(s).

You may also choose to set forth in your articles certain additional information, such as data related to managing or regulating your business, or defining director, officer, or shareholder rights and duties.

6. Bylaws:
Execute bylaws.  Subject to state law, your bylaws are the primary governing document for your business.  They detail the rights, duties, relationships, and responsibilities of its participants to the corporation, each other, and third parties, and should address a plethora of issues, from meetings to voting to buyouts, valuation, etc.

Please realize that corporate bylaws, like any business entity’s organizational documents, are contracts.  They contain terms and provisions that govern your business, your actions, and your relationships.  They become part of the law by which you and your business are bound.  You do not need a set of bylaws; you need bylaws for your business.  It is best not to download or copy bylaws from a source with no knowledge of your situation, endeavors, goals, or expectations.  Use templates, samples, and other business’s bylaws as reference material, but thoughtfully create a set of bylaws subject to your state law and applicable to the particulars of your business.  A local business attorney can help you to execute relevant bylaws that memorialize your intentions and enliven, guide, and support your business.

You do not need to file your bylaws with your state, but you must maintain them in your corporate records.  Your board of directors must adopt them at the organizational meeting.  This is a necessary step in forming your corporation.  Though your corporation exists upon the filing of its articles or certificate of incorporation, it is not formed until you have also held your organizational meeting and fulfilled that meeting’s formation requirements (see below).  Consult your state business corporation statute, or seek help from a local entrepreneurial or business attorney.

7. Organizational Meeting:
Hold your corporation’s organizational meeting.  This is a meeting held to complete formation, and initiate and address corporate activity.  At this meeting, name and affirm, appoint, or elect your initial board of directors.  Memorialize this action with a corporate resolution.  Once the directors are in place, they must approve and adopt the bylaws, elect officers, and create corresponding resolutions.  They should also generally approve the articles of incorporation and actions taken by the incorporator(s), adopt a stock certificate form and any corporate seal, issue stock (be sure to maintain accurate records of all transactions), establish a tax year (calendar or fiscal), and handle any other activity necessary to initiate corporate business.  Memorialize everything with meeting minutes and applicable resolutions.

8. Licenses:
Acquire any licenses required for your business.  Determine these through local and industry-related searches, or seek help from a local attorney.  Comply with all rules and procedures.

9. Other Regulatory Requirements:
Determine whether you have other compliance obligations.  Search state and federal business databases for this information, and comply with applicable rules, regulations, and procedures.  For example, your business may be subject to environmental laws, federal import or export laws, state labor laws and workers’ compensation laws, federal securities laws, or laws specific to your industry or endeavors.

10. Federal Tax Registration:
Apply for your EIN. [3]

11. State Tax Registration:
Register your business with your state revenue department, and obtain any required state tax identification numbers.  Your state may require additional registration actions upon the hiring of any employees.  Consult your applicable rules.

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Post-Formation Requirements

12. Annual State Business Filings:
Corporations must generally file annual reports with the Secretary of State, and pay required annual fees.  Additional filings may be required, such as upon events as changes in issued shares or paid in capital, or merger or consolidation.

13. Required Internal Formalities
Your corporation must generally hold at least one annual shareholders’ meeting, and shareholders must receive proper notice of meetings.  Your state may require that shareholders receive notice in writing a specific number of days before particular meetings.  Please refer to your statute.

Always record minutes of shareholder’s meetings, and maintain these in your corporate records.

Your state may require at least one annual board meeting.  Directors must generally hold regular meetings to carry out managerial business, and should record meeting minutes, resolutions, and all board actions.  Maintain these corporate records.

Your corporation must keep corporate books and records, and make these reasonably available to shareholders.  Corporate records must include organizational documents, records of share purchases and transfers, meeting minutes, board resolutions, and any other records of actions, transactions, and exchanges primary to overall governance.  Certain books or records may be required to be available at shareholders’ meetings.  Consult your state act.

Consult your state’s business corporation act regarding the various rules and formalities applicable to your corporation.

How to Start (and Keep) a Close Corporation:  

Formation and Other Required Formalities:

Generally establish a close corporation just as you would a C-corporation, with a couple of exceptions.  Your articles or certificate of incorporation must generally designate the business as a close corporation.  Your articles may generally provide that the business will be managed by the shareholders.  Please refer to your governing statute for your state’s requirements.

How to Start (and Keep) a Professional Corporation:

Formation and Other Required Formalities:

Formation of a professional corporation is generally identical to that of a C-corporation, apart from a few distinctions.  The business purpose must be designated in the articles or certificate of incorporation as the practice of the profession in which the individuals are licensed, and the corporate name must generally identify the entity as a qualifying professional corporation.  The business’s licensing requirements precede formation.

Name:
A professional corporation’s name must generally end with a word or abbreviation such as “chartered,” “Limited,” “Ltd.,”  “Professional Corporation,” “Prof. Corp.,” or “P.C.”  The name must generally consist of the full or last name of one or more shareholders, or if not prohibited by the respective regulating authority, may be an assumed business name.  Please refer to your statute.


 [1] (And a few notes about Close and Professional Corporations.)

[2] Your name should be unique to help to generate individual brand identity, to avoid infringing others’ rights, and to comply with state law.

[3] http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online.