What Steps Are Involved in Forming a C Corporation?

by Lisa McQuerrey
C corporations can raise money through stock offerings.

C corporations can raise money through stock offerings.

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C corporations are complex business entities that have chosen to incorporate under Subchapter C of Chapter 1 of the Internal Revenue Code. A C corporation is recognized as a distinct legal entity, and it is owned by its shareholders. The corporate structure protects individual shareholders from personal liability arising out of the business. A C corporation is governed by the laws of the state in which it filed articles of incorporation.

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Step 1

Choose a legal name for your business and reserve the name if the Secretary of State in your state offers that service. Not all states accept business name reservations, and those that do usually charge a fee for the service. Generally, the Secretary of State will hold the name only a short time, such as 30 days, while you prepare your articles of incorporation. If the articles are not filed within that time, the name is released back to the public pool and another company can register it.

Step 2

Draft and file articles of incorporation with the Secretary of State. Although it’s possible to prepare and file the organizing document yourself, you may prefer to have an attorney handle it, or you can use an online service such as LegalZoom. In most states, you will be required to list the names and addresses of the initial officers and directors of your corporation in the articles.

Step 3

Issue stock certificates to the initial shareholders, once you receive notice from the Secretary of State that your articles of incorporation have been accepted and filed.

Step 4

Apply for a business license and other permits specific to your industry, if required by your state or local government. In some cases, you might also need to apply for federal licenses or permits before your corporation can commence operations.

Step 5

File Form SS-4 or apply online at the Internal Revenue Service website to obtain an Employer Identification Number. You must obtain an EIN even if you don't plan to hire any employees in the foreseeable future. The EIN is your corporation's tax ID number, and besides using it to report employee wages, you'll need it to open a bank account, apply for a loan and file your annual taxes. If you apply online, you can generally obtain your EIN in just a few minutes.

Step 6

Apply for any other ID numbers required by state and local government agencies. Requirements vary from one jurisdiction to another, but generally, your business most likely will be required to pay unemployment, disability and other payroll taxes – you will need tax ID numbers for those accounts in addition to your EIN. Be sure to comply with all filing requirements, as failing to do so could result in substantial penalties. If you are not familiar with state and local filing requirements, it would be prudent to seek legal advice.