How to Set Up a Corporation

by Shaa Hudson
Forming a corporation may be challenging, but it is also rewarding.

Forming a corporation may be challenging, but it is also rewarding.

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A corporation is a type of business entity that is owned by its shareholders. Corporations are governed by state law, and each state has its own statutes that establish formation procedures, registration requirements and fees. Often, these procedures are complicated. For that reason, it’s important to discuss the decision to form a corporation with an attorney.

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State Requirements

Step 1

Consider the state in which you reside as an initial possibility for forming the corporation. Most states have websites that list requirements for incorporation. Generally, this information can be found on the Secretary of State’s website. A wealth of information is usually available to the public, including the specific requirements and procedures for incorporating in that state, the applicable fees and the required documentation that must be filed with the state.

Step 2

Make a list of the requirements. This list should include the cost of filing, the documents that must be filed and waiting periods. Incorporation fees can be expensive, especially when an attorney is engaged. When evaluating the costs, also note the annual filing fees you’ll be required to pay to keep your corporation active. Some states have a flat, annual fee that can run into the hundreds of dollars, while others levy a fee based on the corporation’s share capital for the preceding year.

Step 3

Perform a name search using the state’s database to determine whether the name you want to use for your corporation is already being used by another company. Some states will reserve your preferred name if it’s available for a short time, such as 30 days, but this service can be expensive. Another option is to perform a general search via the Dun & Bradstreet website (link in Resources).

Step 4

Prepare the documents that must be filed with the state. The organizing document is typically called the articles of incorporation or certificate of incorporation, which varies by state. Most states provide a template that allows you to quickly fill in the information to complete the form. The articles must provide basic information such as the name of the corporation, its registered agent and the names of the incorporators. The business purpose of the corporation and the number of authorized shares must also be stated. Additional information may be required, depending on your state. Once the organizing document is complete, review it with an attorney, then sign the document and mail it to the Secretary of State with the applicable filing fee and any other required documentation.

Step 5

Apply for an Employer Identification Number (EIN) by navigating to the Internal Revenue Service website and completing Form SS-4 (link in Resources). An EIN is a tax ID number assigned to your corporation by the IRS that is similar to your personal Social Security number. You may apply for an EIN either before or after you file your paperwork with the Secretary of State. You will need an EIN to open a bank account, apply for a loan and file your corporation’s state and federal taxes.