Incorporating Your Business For Dummies
If you're thinking about incorporating your business, learn the terms associated with the process; get ready to complete the information on the business incorporation worksheet; and consider some reasons why the time is right for your business to become a corporation.
Business Incorporation Terms to Know
If you're considering incorporating your business, do your research (there's a bunch of information about the process) and become familiar with these terms associated with business incorporation:
|Term||What It Means|
|Articles||The title of the document filed in many states to create a corporation. Also known as the certificate of incorporation or corporate charter.|
|Bylaws||The regulations of a corporation that, subject to statutory law and the articles of incorporation, provide the basic rules for the conduct of the corporation's business and affairs.|
|Certificate of authority||Formal evidence of qualification issued by a state to a foreign corporation.|
|Certificate of good standing||A certificate issued by a state official as evidence that a corporation is in existence or authorized to transact business in the state. Also known as a certificate of existence or certificate of authorization.|
|Domestic corporation||A term applied to a corporation doing business in its state of incorporation.|
|Foreign corporation||A term applied to a corporation doing business in a state other than its state of incorporation.|
|Franchise taxes||A tax or fee usually levied annually upon a corporation, limited liability company, or similar business entity for the right to exist or do business in a particular state.|
|LLC (limited liability company)||An artificial entity created under and governed by the laws of the jurisdiction in which it was formed. Limited liability companies are generally able to provide the limited personal liability of corporations and the pass-through taxation of partnerships or S corporations.|
|Minutes||A written record of meetings of or actions by the board of directors or shareholders.|
|Par value||A minimum price of a share below which the share cannot be issued, as designated in the articles of incorporation.|
|Registered agent||A person or entity designated to receive important tax and legal documents on behalf of the corporation. The registered agent must be located and available at a legal address within the specified jurisdiction at all times. Also known as a resident agent.|
|SubChapter S corporation||A corporation granted a special tax status as specified under the Internal Revenue Code (IRC). Since this type of corporation pays no income tax, all gains and losses of the corporation pass through to the individual shareholders in proportion to their holdings.|
Business Incorporation Worksheet
Incorporating your business can be overwhelming - a lot of information has to be collected. Save yourself some time by getting the information in this incorporation worksheet together so you're ahead of the game:
State of Incorporation _______________
State(s) of Qualification (1) ________________ (2) ________________
Type of Entity (circle one):
Desired Corporate Name _____________________________________
Alternate Corporate Name ____________________________________
Desired Domain Name _______________________________________
Alternate Domain Name ______________________________________
Number of Shares of Stock _________________
Par Value of Shares of Stock ________________
Names/Addresses of Directors or Members
|(1) _________________________||(2) _________________________|
Name/Address of Registered Agent
Reasons for Incorporating Your Business
Deciding to incorporate your business, or not, can be nerve-wracking. Even if you've done your research and understand what it means to incorporate your business, you may still be unsure about moving forward. Take a look at these reasons to see if you're ready to take your business to the corporate level:
You want to protect your company name.
You want greater protection of your personal assets.
You have been told by your financial advisor that your business is no longer a hobby.
You're just starting up.
You want to open a company bank account.
You have a "great" idea.
You hire employees.
You want to take tax deductions on medical, life, and disability insurance you provide for yourself and your employees.
You plan to go public.
You're looking for investors.
You want to grow your company.
You want to impress your friends and business associates by adding "Inc." to the end of your company name.
You're running a home-based business.
You want your business to continue operating after your or a partner's death.
You want to raise capital through the sale of stock.
You plan to open another business.
You plan to expand your business to another state.