What do you need to know to incorporate a business?
Do you know how to incorporate a business? When it comes to your business, the term “incorporate” means to convert your business into a corporation. By law, a corporation is treated as a person, who can buy property, sell property, commit crimes, be taxed and contracted. Turning a business into a corporation prevents you from being held personally liable for what happens to the business, at least to a certain extent.
Business Incorporation: What to Expect
After you officially decide to incorporate, you’ll need to contact the state office or the Secretary of State in your state. You can incorporate in any state though, even if it’s not the state in which your business is located. The state is responsible for registering your business as a corporation. They provide you with instructions and the forms needed to start the process. They’ll also educate you on the fees you will need to pay.
Next, you’ll need to decide whether you want to complete the process yourself or hire an attorney to handle the details for you. If you do it yourself, keep in mind the process requires software or an internet site to guide you. You’re only responsible for the fee for purchasing the software or using the site.
By going through the process yourself, you save money because you avoid having to hire an attorney, which can cost you as much as $1,000. While the incorporation process often takes more time with an attorney, you will have an expert on your side to do all the hard work and answer any questions you may have. The attorney knows the law well, so you won’t risk missing a detail like you might if you did it yourself.
Incorporate Your Business: Documentation
One of the papers you are required to complete is a certificate or articles of incorporation, which varies based on your state. You’ll need to write down the proposed name of the corporation and the name and addresses of all associated with the business. You’ll need to select a location for your business as well as describe the purpose of your corporation.
After you complete these steps, you must draft a set of bylaws. The bylaws include who the director and officers are, when shareholders meet, important details related to running the business and the responsibilities of the shareholders. Make sure you know the responsibilities you’re delegating.
For instance, the board of directors makes sure the company is run according to the law. The board is the one who is in charge of decision-making for the company. The director oversees officers and other employees and has the power to hire and fire officers. Officers are the other individuals who work for a company. They include positions like the president, secretary, treasurer, and CEO. These individuals play an important role but don’t have the fiduciary responsibilities he board of directors has. Shareholders are the ones given stock of the company. Shareholders aren’t responsible for any of the debt of the company, but they are the ones who elect the board of directors and the officers.
After the bylaws are accepted, the Secretary of your state will send you the certificate that means your business is officially incorporated.
Where to Turn to Incorporate a Business
As you can see, there are many steps necessary to incorporate a business. While technically you could do it on your own, you may experience some unfortunate pitfalls along the way.
The better plan is to trust your business incorporation to a professional. We can help.