How to Start a Corporation: Advice for All First-Time Entrepreneurs

28 June 2019

There are over 1.7 million C corporations in the U. S.

Starting a business is no small feat. When you’re in the throes of forming a new firm you live on the border of tension and exhilaration. As you take the chance as a startup you will need to make various decisions.

A major turning point is the decision on what kind of legal structure your business will take.

Will you choose to be a sole proprietorship? Partnership? Business corporation? What are the legal implications of the structure you will choose?

Many first time entrepreneurs end up choosing to form a corporation. But how do you proceed if you don’t know how to start a corporation? While a corporation has several benefits, you need to understand what it takes to form one.

Here is a comprehensive guide on how to go about it.

How to Start a Corporation

Starting a company is not as difficult as some people think. Here is a step-by-step guide on what it will take you to go from idea to corporation.

Start by Picking a Name

The journey to creating a corporation begins by selecting a name. The main thing to note is that the name has to follow the rules set by your state’s corporation division.

Although each state has its specific rules (that you should find out about) there are some general ones that govern naming a corporation.

You can’t name your corporation after one that is already registered by the Secretary of State's office. Ask the corporation office how you can check the availability of the name you plan to use.

If the name isn’t on file you can pay to reserve it for a brief period while you register.

The name you choose to use must include a corporate designation. You can either use ‘Corporation’, ‘Incorporated,’ ‘Limited’ or their abbreviations (Corp., Inc., or Ltd.)

There are certain words that you can’t use in your corporation's name as they can imply an association with restricted business types or the federal government.

These include Bank, Reserve, United States, Federal, National, Cooperative among others. Find out the full list from your Secretary of State’s office.

In addition to these regulatory requirements, it is essential that the name you want to use doesn’t infringe another firm’s trademark. Consult your state on how to check for any trademark issues.

Once you confirm that your proposed name is free and clear to use, then go ahead and reserve it. It will be automatically registered when you file your articles of association.

Note that if you plan on using a different name to sell your products then you must file a ‘fictitious’ name statement. Do this in the state or county where your corporation will be headquartered.

Appoint the Directors

In any corporation, directors play a critical role in making policy and financial decisions for the business. The initial owners of the corporation appoint the directors.

The common practice for many owners when they get to open a corporation is to appoint themselves as directors.

While owners can be directors, directors do not have to be owners. As your corporation grows you will find this a very useful fact when scaling expertise without having to dilute the shareholding.

The number of directors you will need to appoint depends on your state’s regulations. Many states allow a corporation to have only one director while others stipulate that there can be one director only if it has one owner.

You should consult your state’s corporation office to find out the law governing the appointment of directors to inform your decision making.

File the Articles of Incorporation

Articles of incorporation is the document that will establish your corporation’s existence. In some states, it is also known as Certificate of Incorporation or Charter.

Articles of incorporation do not have to be lengthy and your state will actually have a form at the corporation office for you to fill out if you want to keep it simple.

Some of the information the articles of incorporation must specify include:

● The names of the directors
● The principal office address of the corporation
● The corporation’s name
● A registered agent for the company

The registered agent is the person who will be the representative for tech corporation.

If the public or government wants to get in touch with the corporate it will be through the registered agent. In most cases, one of the directors fills this position.

Create the Bylaws

The bylaws of a corporation are the internal rules that oversee the daily operations. You are not required to file the bylaws with the state.

It is, however, prudent to hire a business attorney to help you draft them. If you can’t afford a lawyer or don't want to deal with one, you can look for a self-help resource to get you going.

Your corporation's bylaws will include:

● The voting requirements for shareholders and directors
● When and where to have directors’ and shareholders’ meetings
● The authorized number of stocks the corporation can issue

Draft the Shareholders Agreement

A shareholders agreement is an optional document that lays out the plan for when the corporation’s ownership changes hands. It states what can happen should an owner die, sell their shares, becomes disabled among other things.

Conduct the First Board Meeting

Once the articles of incorporation have been filed you are ready to hold your first board of directors meeting. In this first meeting, the board will need to make essential decisions on behalf of the corporation, which includes:

● Setting the corporation's accounting year
● Adopting the bylaws
● Appointing corporate officers
● Authorize the stock
● Adopt the stock certificate form and the corporate seal

You can issue stock after holding this first board meeting so that the corporation can begin operations.

Obtain Permits, Licenses and Tax Registration

The final stage when forming a corporation is getting the necessary approvals and licenses for operations. Check the Small Business Administration website for any necessary state requirements.

The Internal Revenue Service will help you register your corporation for tax purposes. You will also need to check the state and local tax requirements to find out what certifications are necessary.

Once you are done with the above you only need to open a corporate bank account, create your logo and your corporation is ready for business.

Get Started

When you are starting a new business there are different legal structures you can use. Registering as a corporation has many benefits. However, the process of getting incorporated can be intimidating.

Wondering how to start a corporation?

Universal Creative Solutions understands the need new entrepreneurs have in knowing how to best set up their corporations. Check out our operations consulting services today to learn how you can start your new business on a strong footing.