A Comprehensive Guide to Forming a Corporation

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• Best Business Name Generator: TRUiC Name Generator
• Get an EIN: IRS.gov
• Best Corporation Formation Service: Northwest (1st year of registered agent services included)

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• Best Corporation Formation Services 2024
• Best Registered Agent Services 2024
• How to Start a Corporation
• How to Check Corporation Name Availability

Steps to Form a Corporation On Your Own

In this section, we provide a detailed walkthrough of the steps to form a corporation by yourself. From understanding state-specific requirements, naming guidelines, and appointing a registered agent to holding an organizational meeting and filing formation documents, we've got you covered.

A Comprehensive Guide to Forming a Corporation – Transcript

So you're looking to take your business legit. You met with your accountant and anyone that you're forming your business with, and you've decided that forming a corporation is the best option for you. What steps do you have to take in order to make it official? Not to worry — we'll be covering everything that you need to know about starting a corporation in this video. 

Hey everybody, Will Scheren here from Small Business Startup Guide by TRUiC. This video is part of a larger course dedicated to helping small business owners cut through the noise and get to the essentials of starting and operating their business. If that sounds like it would be really useful to you, be sure to like and subscribe. 

A corporation is a type of business structure that's more complicated than an LLC, but it offers benefits that LLCs do not. Corporations are great if you're looking to raise money from venture capital or list on a stock exchange. Corporations are also more effectively able to carry money over between tax years. 

If you're starting a business and not sure which business structure is best for you, sure to show the business plan that we created earlier in this course to your accountant. 

There are two ways to form a corporation: you can form one yourself, or you can hire a service to do it for you. In this video, we'll take a look at both options to help you decide how to go about forming your own corporation. 

But remember, this video is not legal advice. If you're unsure of whether or not your company should be a corporation, consult with an accountant or an attorney. 

Let's start by looking at steps to form a corporation on your own. Every state has slightly different requirements for forming a corporation. For example, New York State still requires that corporations post something about their formation in a local newspaper. We provided a link below this video where you can find the exact actions that you'll need to take in every state, but in general, you'll need to follow these steps. 

Step 1: choose and secure your corporation's name. The name you select for your corporation will establish its brand. If you need help understanding how to name your business in a way that will resonate with customers and align with the brand, watch our earlier video in this course. It's important to pick a name that both aligns with your brand and follows the naming guidelines in your state. 

You'll need to check your state-specific naming requirements, but in general, you should follow these rules: 

You must pick a name that includes the word “corporation,” “company,” “limited,” “incorporated,” or some abbreviation of these terms. 

Your name cannot use the word “bank,” “trustee,” “trust,” “credit union,” or other related words without approval. 

Your name can not include words that would confuse it with a government agency such as “FBI,” “State Department,” or “Treasury.” And the name must be distinct from any other corporations in your state. 

For more information on what makes a business name distinct, check out our other video on how to name your business. If you need help or want a tool to lean on when coming up with a name for your corporation, check out TRUiC’s AI-powered business name generator. 

Once you have a name selected, do a name search at your state Secretary of State website to make sure that the name is available. 

Step 2: choose a registered agent. You must appoint a registered agent when you register your corporation with your state. Some states refer to registered agents as statutory agents, resident agents, or agents for service of process. 

The registered agent can be an individual in the company, including yourself, or you can hire a professional service authorized to do business in your state. This service would send and receive legal papers on your behalf. These documents include official correspondence like legal summons and document filings, which your registered agent will receive and forward to you. 

Your registered agent will also help remind you to file the necessary reports. Failure to properly maintain your corporation can result in fines or even dissolution, so this assistance is invaluable. 

Designating someone else to serve as the registered agent for your corporation definitely has its benefits, and you can get deep discounts on registered agent services with Northwest Registered Agent using the link that we provided below this video.

At TRUiC our mission is to offer all our resources and information for free - but we support our work by using affiliate links, meaning we earn a commission on many of the amazing deals we’ve negotiated for you. Full transparency, Northwest is one such affiliate partner.

To learn more about hiring a registered agent service for your corporation, watch the earlier video in this course, where we take a deeper dive. 

3: hold an organizational meeting. Before you file the official formation documents in step 4, you'll need to hold an organizational meeting to complete the following tasks: create approved bylaws, select your initial directors, determine your share structure, and execute an incorporator’s statement. Let's break down each of these. 

Create approved bylaws. Bylaws are the rules that will determine how your corporation will be organized and run. You can think about the bylaws as the constitution for your corporation. It makes the rules and priorities clear for everyone involved. A corporation's bylaws will supplement the rules set forth by the federal government and the state. 

In your bylaws, be sure to include how the corporation will be governed, including the role of directors and officers, how meetings are held, voting procedures, and how officers and directors are elected. Also include how records will be kept and managed, how disputes will be handled, how bylaws will be added and amended in the future, the date of the annual shareholder meeting, how to negotiate contracts, fiduciary duties to the corporation, and what constitutes a quorum for voting purposes. 

Appoint initial directors. You must appoint the state's required number of directors until the first shareholders meeting. A corporate director is in charge of the adoption, amendment, and repeal of the operational bylaws, as well as the election supervision and removal of officers. After forming the corporation, the incorporators or initial directors, if named on the formation documents, should call an organizational meeting. During this initial meeting, either the incorporators will elect a board of directors or the initial directors will appoint the officers. 

Choose a share structure and strategy. A share of stock is a unit of the ownership of a corporation. Each share of stock represents a percentage of ownership of the company. For example, if a corporation issues only one share of stock, the shareholder or the stock owner would then own 100% of that corporation. Shares can be structured into classes. Each class, termed as a “share class,” holds different rights and privileges. You can have multiple classes, and each class can hold any number of shares. 

Some states only allow companies to list one class of shares on their formation document. In these cases, you must either complete an additional provision or draft your own formation documents. Check with your state for further instructions. 

We recommend starting with a high number of authorized shares. Many attorneys suggest 10 million. By starting with a high number, You have the ability to issue shares as needed without paying legal fees to increase your initial authorized shares amount. 

Create and execute an incorporator’s statement. The incorporator should sign an incorporator’s statement with the complete names and addresses of each of the initial directors, and this should be stored in the corporate records book. This document names the initial directors that will serve until the initial board of directors is elected during the first shareholders meeting. It should be stored with the rest of your corporate records. 

4: file formation documents. You will need to file formation documents with your state. Once the documents are approved, you will have officially formed a corporation. But the method of filing in each state is different. Again, we've provided a link below this video that outlines the incorporation process for each state in greater detail. 

Most states provide the formation documents online, while others require you to draft your own formation documents. The formation documents will cover the basics of your corporation, including your corporate name and principal address, your registered agent's name and physical address, and the number of authorized shares that your corporation is allowed to issue. 

5, get an EIN. Lastly, you'll need to get an Employer Identification Number or EIN from the IRS. Also known as a Federal Tax Identification Number, your EIN is like a Social Security number for your corporation. An EIN is how the federal government tracks your business for tax purposes, but it's also necessary to get a business bank account and to legally hire employees. 

But the good news is that EINs are free and can be easily and quickly obtained by visiting the IRS.gov website, which we have provided a direct link for below this video. For more information on how to get your EIN, check out our other video links below. 

Now that you know all the steps for forming a corporation on your own, maybe you don't want to go through the process all by yourself. Let's take a look at the other way to form a corporation. 

Hiring a professional service to file your forms and act as the registered agent for your corporation will cost between $50 and $150 per year. However, there are several benefits to working with a pro. A hired registered agent helps with getting your reports filed on time. It helps you stay organized by keeping your business mail separate from your personal mail, and it's available during all regular business hours to accept official mail. 

A final and important additional benefit is privacy. A professional service will withhold your name and address from the company's contact information. 

If you want to form a company that can issue stock, raise money through investors, or efficiently carry money over between tax years, then a corporation is the right business structure for you. In the next video in the course, we'll go over obtaining an EIN number for your business in greater detail. 

This video is part of a step-by-step course that gives business owners all of the essential information for starting and operating their business. We've provided a link below this video for you to get access to all of the free and discounted business tools that we mention in this course. 

Be sure to like and subscribe to get more of this content. See you in the next video, and if you have any questions, let us know.