Form a Corporation

Follow these steps to form your own corporation.

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1. Choose a name.
The name of your business cannot be the same as the name of another corporation on file with your state's corporations office (usually the Secretary of State's office). It must end with a corporate designator, such as "Corporation," "Incorporated," or "Limited," or an abbreviation of one of those words.

The corporations office can tell you how to check if your proposed name is available for your use. For a small fee, you can usually reserve your corporate name until you file your articles of incorporation. For more information, contact your state's corporations office or see Choosing a Business Name FAQ.

2. Appoint directors.
A corporation's directors make the major policy and financial decisions for the corporation, including authorizing the issuance of stock and appointing corporate officers. The initial directors are not elected, but appointed by the owners of the corporation. Often, the owners simply appoint themselves to be directors, though the directors do not have to be owners.

3. File articles of incorporation.
All corporations must file "articles of incorporation" with the state's corporate filing office. In this document, you fill out some basic information about your corporation, such as its name and principal office address.Some states (including Connecticut, Delaware, New York, and Oklahoma) use the term "certificate of incorporation." Washington calls the document a "certificate of formation," and Tennessee calls it a "charter." For more information on filing your articles, see Incorporate Your Business: A 50-State Legal Guide to Forming a Corporation, by Anthony Mancuso (Nolo).

4. Draft bylaws.
Corporate bylaws are the internal rules that govern the day-to-day operations of a corporation, such as when and where the corporation will hold directors' and shareholders' meetings and what the shareholders' and directors' voting requirements are. Typically, the bylaws are adopted by the corporation's directors at their first board meeting. For more information, see Incorporate Your Business: A 50-State Legal Guide to Forming a Corporation, by Anthony Mancuso (Nolo).

5. Create an owner buyout agreement.
A shareholders' agreement helps owners of a small corporation decide and plan for what will happen when one owner retires, dies, becomes disabled, or leaves the corporation to pursue other interests. For more information, see Plan Ahead for Changes in Corporate Ownership or Nolo's book Business Buyout Agreements: A Step-by-Step Guide for Co-Owners, by Anthony Mancuso and Bethany Laurence.

6. Hold a meeting of the board.
At the board of directors' first meeting, the directors appoint corporate officers, adopt the corporate bylaws, authorize the issuance of shares of stock, set the corporation's fiscal year, and adopt an official stock certificate form and corporate seal. For more information on board meetings and how to document corporate decisions, see Documenting Corporate Decisions.

7. Issue stock.
Issuing shares of stock distributes the ownership interests of the corporation. You should not do any business as a corporation before issuing stock, and all stock issuance must comply with securities laws. For more information, read How to Form a Corporationor download Corporate Stock: Issue Shares and Pay Dividends, by Anthony Mancuso (Nolo).

8. Obtain licenses and permits.
Before you begin doing business, you need to obtain the required licenses and permits that anyone needs to start a new business. Among the licenses and permits you may need to obtain are a business license and, if your corporation willsell products,a seller's permit. For more information, seethe Obtaining Licenses and Permits section of Nolo's website.

9. Retain your corporate status.
To retain the corporation's status as a separate entity,corporate owners (shareholders)must observe certain formalities, such as keeping detailed financial records and recording minutes of major decisions. For more information, see Documenting Corporate Decisions or The Corporate Minutes Book: A Legal Guide to Taking Care of Corporate Business, by Anthony Mancuso (Nolo).

 

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