Since a corporation is considered a separate legal entity under state law, once you incorporate you will not be held personally liable for the corporation's business debts. Forming a corporation is a relatively simple matter. You don't have to do business or even maintain a business office in a state to incorporate there.
Choosing the Right State
Since you don't have to do business in a state to incorporate there, you can choose to incorporate in any state or the District of Columbia. You will also have to register as a "foreign corporation" in any state where you actually do business. There are many reasons why you might want to incorporate in one state and not another. Articles of Incorporation filing fees vary widely by state, and state tax rates vary. Some states, such as Nevada, have no state corporate income tax. Other states, such as Delaware, are popular because of their favorable corporate laws.
Selecting an Appropriate Name
To incorporate, you must choose a legal name that is neither identical or confusingly similar to any other business entity registered with the state. That includes other types of businesses such as LLCs and partnerships. You can perform a name availability search on the state government website to confirm your corporate name's originality, and you can reserve your name for a small fee before you incorporate. Your name must include some type of suffix such as "Inc." that notifies the public of your limited liability. If you don't like the corporate name that appears on your articles of incorporation, you can register a fictitious name with the state government.
Naming a Registered Agent
Every state requires you to name an in-state registered agent to do business there. Although the registered agent must have an in-state street address, this doesn't mean you have to establish an in-state office. Many corporations simply designate a local lawyer as their registered agent. The registered agent's job is to personally take delivery of the summons and complaint in case your corporation is sued. Some states also use the registered agent's address to mail certain items, such as state tax bills.
Filing the Formation Documents
To legally incorporate, you must file a formation document known as the articles of incorporation or the certificate of incorporation with the state secretary of state's office. This document is usually only a page long and requires basic information such as the name and address of the corporation and its registered agent, the number and classes of shares it is allowed to issue and its business purpose. Some states don't even require you to list the names of your directors. You must pay a filing fee. Many states allow you to file online.
Writing the Bylaws
Although you are required to draft bylaws and keep them on file, you don't have to file them with any state authority. Some states allow you to include the bylaws in the articles of incorporation. As a one-person corporation, you might consider pointless many standard bylaw provisions such as voting rights, appointment of officers and procedures for meetings. Nevertheless, you should still hold shareholders' and directors' meetings, even if only you attend, and draft written resolutions for the corporate files.
Holding the Organizational Meeting
After incorporation you should hold an organizational meeting in which you formally approve the bylaws and authorize yourself to conduct preliminary corporate business such as opening a corporate bank account and applying for a business license in the name of the corporation. If you are converting from another type of business, such as a sole proprietorship, you should authorize the corporation to purchase its assets in exchange for issuing corporate shares in your name. Don't ignore these formalities, because if you do, then corporate creditors might be able to convince a court that your corporation is a sham. If this happens, creditors can come after your personal assets for corporate debts.