Are you thinking about starting a business? Do you want to incorporate yourself?
Starting a corporation can be a good idea when you’re first starting out because it gives you protection from personal liabilities. You can take risks, make mistakes, and even make losses as an incorporated company, and it won’t affect you as a person.
But if you’re like most new business owners, incorporating is a big step. You know how much work it will take to turn a profit, but you’re not so sure how to start a corporation?
If so, you’re at the right place. Here are several things that you need to know about starting a corporation.
Gather the Documents Required for Filing
When learning how to start a corporation, one of the most important steps is to gather the documents required for filing. The documents you may need include filing forms, the article of incorporation, business plans, banking documents, and a list of incorporators.
It is imperative to have all necessary documents filled out completely and accurately, as these documents will be used to form the corporation. You should also consider consulting with an attorney or accountant to ensure the documents are properly prepared.
To start a business, you will need to collect the proper paperwork from the Secretary of State to form the corporation. This is typically in the form of an application that must be completed and submitted along with a filing fee.
The required forms vary from state to state, so be sure to double-check all relevant legal information. In some states, additional documents may need to be filed to signal the formation of the corporation.
Be sure to have the proper documents ready and to research each step before getting started.
Determine the Best Legal Entity for Your Business
When starting a corporation, it is important to determine the best legal entity for your business. Different types of entities include:
- sole proprietorship
The choice depends on the size and type of business and the owner’s preferences. Generally, corporations are the most complex and expensive type of business entity to create and maintain but offer the most liability protection and most opportunities for growth.
The necessary steps to form a corporation include selecting a name, obtaining a federal tax identification number, registering the business with the state, drafting bylaws, issuing stock, and obtaining any necessary licenses and permits.
Careful consideration should be taken to ensure the entity meets the needs of the business. Once the entity is established, the business must maintain it in good standing to protect its owner’s interests.
Choose Your Corporations Officers
Choosing your corporation’s officers is an important step to successfully starting a corporation. Depending on the size of your business, you may need to consider a few different positions, including:
You can choose to have one person fill multiple roles, or several people share the responsibility. When selecting officers, look for individuals who have a record of success and are well-connected with people who could help your corporation.
Make sure to create a job description and a list of expectations for each position to ensure clarity. Take into consideration the employees’ skill sets and personalities to determine if they are the right fit.
For added accountability, having an outside individual or legal advisor review the roles and responsibilities of each officer may be helpful.
Establish an Agreement With Your Business Partners
It is important that you establish an agreement with your business partners. This agreement should clearly outline each partner’s rights and responsibilities. It should contain information about ownership, initial investment, and how profits and losses are divided.
It should also include a plan for resolving conflicts between partners and ways of restructuring the company in the future. It can be beneficial to consult with an attorney when drafting the agreement.
Once the corporation is legally established, the partners should keep a written record of all significant events, decisions, and changes in the company. With a solid agreement in place, the corporation will be well-prepared for its launch.
Familiarize Yourself With Tax Requirements
Starting a corporation involves first gaining an understanding of all the tax requirements associated with it. There are certain taxes that only individuals and businesses must pay, and understanding these taxes is essential to starting a corporation. These include:
- income taxes
- estimated taxes
- self-employment taxes
- payroll taxes
Additionally, corporations must file an income tax return and make estimated tax payments to the federal government quarterly. To ensure you comply with all applicable state and federal tax requirements, consult with a tax advisor who specializes in corporate taxes prior to forming your corporation.
Research any special tax exemptions your corporation may qualify for to ensure you don’t overpay on taxes. Lastly, consider hiring an accountant to help you keep your finances and taxes organized.
Learn How to Start a Corporation the Right Way
In conclusion, learning how to start a corporation takes planning, but the potential rewards are great. With a bit of research, proper paperwork, and obtaining the necessary licenses and permits, you can get started with the process of starting a corporation.
All that’s left is investing time and effort to make it a success. So, take the initiative today and start your own business by forming a corporation.
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