How to Establish a New C Corporation

By David Carnes

The term "C corporation" is a taxation status established by the Internal Revenue Code and administered by the IRS. Once you form a corporation, you don't have to do anything to make it a C corporation. The IRS will simply treat your corporation as a C corporation, unless it qualifies as an S corporation and notifies the IRS that it elects to be taxed as such. C corporations are taxed separately from their shareholders.

Advance Preparation

Since an incorporator must sign the articles of incorporation, which is the document that once filed creates the corporation, you must select an incorporator or incorporators to submit and file the articles, as well as guarantee its accuracy. You must also select a registered agent with an in-state street address. The registered agent must be willing to receive the corporation's official correspondence. Finally, you must select a name for the corporation, which must include an indication of limited liability, such as "Incorporated," "Corporation," or an abbreviation thereof. You can use the name availability search function typically found on the state secretary of state's website, or equivalent state government website that handles business formations, to see if the name you want is already being used. For a fee, you can reserve the name for a certain period.

Registration

A fill-in-the-blanks version of the articles of incorporation should be available on the secretary of state's website. It is typically only a page or two long; many states allow you to file it online. On the articles, you must include reveal basic information such as the corporate name, the head office address, the name and address of the registered agent, the name and address of the incorporator, the number of authorized shares and the corporate purpose. You will be required to pay a filing fee. Once the secretary of state accepts the articles of incorporation, your C corporation is established.

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Bylaws

Although you must prepare corporate bylaws, you don't have to file them with any authority. Your bylaws should state how the corporation will select directors, when and where meetings of the directors and shareholders meetings will be held, how many directors or shareholders make a quorum, what officers the corporation will establish, how shares will be transferred, which corporate decisions are reserved only for the shareholders, and other corporate governance matters. The corporation should keep the bylaws on file at corporate headquarters.

The Organizational Meeting

Soon after filing the articles of incorporation, the corporation should hold an initial meeting of the board of directors. Some states allow you to name directors in the articles of incorporation. If not, the incorporator(s) should convene the meeting, appoint directors and turn the meeting over to them. The directors should approve the bylaws and sign them. They should also authorize the corporation to undertake other important preliminary matters such as opening a corporate bank account and applying for a business license.

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References

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