You are ready to start your business. Congratulations! When choosing a Limited Liability Corporation (LLC) or a general corporation as your business form, you must consider many factors, such as filing requirements, taxes, liability and management. The filing and paperwork requirements for establishing general corporations can be a little more involved than for LLCs, but forming either business is fairly simple to do.
Fit your business needs with the right LLC package
File the necessary paperwork with your state and pay the filing fee. For corporations, you will generally file “articles of incorporation.” For an LLC, “articles of organization” is the common name. Your articles should be fairly simple. You can usually prepare them in just a few minutes by filling out a short form provided by your state's corporate filing office, usually the secretary of state's office. Typically, the articles just specify basic information about your business, such as its purpose, name, address, and sometimes the names of its owners or directors. You will usually also have to provide the name and address of your business’ registered agent, the person that will receive legal papers in the case of a lawsuit. Generally, all of the owners may prepare and sign the articles, or just one person. You'll have to pay a filing fee when you submit your articles. In most states, the fees are fairly reasonable, but look out for annual tax charges that can be quite high.
Create an operating agreement (or bylaws for a corporation) that specifies the rights and responsibilities of the owners and management. You don’t have to file an operating agreement in most states, nor are you required to have one, but these “rules” help you manage your business on a day-to-day basis. A typical operating agreement sets out voting power and requirements, division of liabilities and assets, management directives, and dissolution or change-of-ownership provisions. You can create an operating agreement by yourself using an online legal document provider or hire a lawyer to draft it for you.
Prepare paperwork for any stock issuance if you are founding a corporation. Fortunately, most small corporations qualify for exemptions. For example, you typically do not have to register a private sale to a small number of people. If you are issuing shares, you'll need to document the names of the shareholders, how many shares they will buy, and how they will pay for their shares. You'll also have to prepare and issue the stock certificates. You may want to seek the assistance of a securities lawyer.
Apply for any local and state licenses and permits that may be required for your business. These may include a business license, occupational license, sellers' permit or a zoning permit.