How to Incorporate

As you’re starting your own company you may be wondering how to incorporate and in fact, what a corporation itself is. A corporation exists as its own legal entity and provides personal liability protection, builds business credibility, works as a shield from company debt and offers certain tax advantages for the small business owner. Incorporation is a fairly simple process, but it might be beneficial for you to work with an online filing service that will guide you through the incorporation process including Bylaws, Organizational Minutes and the like.

You will want to start by choosing the state in which to incorporate. You will most likely want to incorporate in your home state or the state where your business will be physically located. While there may be advantages for you to incorporate in a business-friendly state such as Delaware, Nevada or Wyoming, virtually every state requires that an out-of-state corporation “re-register” in the state where they are actually doing business; so you will more than likely still have to pay the necessary taxes and fees in your state if you choose to incorporate elsewhere.

To legally become an existing corporation in your state, you will need to file Articles of Incorporation and complete Corporate Bylaws, which will be the rules for operating your corporation on a day-to-day basis. How to incorporate also requires that you choose a name for your business. You will need to make sure the name is available by checking with your state’s corporate filing office, usually the Secretary of State. An online filing service can check for name availability on your behalf.

Because a corporation exists as its own entity, it requires its own identification number just as an individual has a Social Security Number. A company’s identification number is known as a Federal Tax I.D. Number or FEIN or EIN. An online incorporation service can obtain your corporation’s FEIN during the incorporation process or you can obtain one yourself from the IRS.

Incorporating as a corporation also requires a certain management structure of your company. Corporations are structured with Shareholders owning the company stock. Shareholders elect the Directors, also known as the “Board of Directors,” and the Directors appoint the corporation’s Officers (President, Secretary, Treasurer, etc.) to operate the company on a daily basis. A corporation’s Shareholders can also serve as its Directors and Officers, so if you intend to operate your company on your own or will hire only a small number of employees, you will most likely be the only Shareholder, Director and also hold all the Officer positions.

Once you’ve completed the legal steps of how to incorporate, you will need to follow other steps to successfully operate your business. Some of these steps might be to open your company bank account, lease office space and ultimately, figure out how you will finance your business until you start earning income. The important thing is that you can become incorporated fairly quickly, depending on the filing processing time in your state, freeing yourself up to see your business idea become a legitimate business.