By: First Union | Date:
Steps to Follow When Incorporating Your Small Business
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As your small business grows, you may be thinking about incorporating it. Some reasons for this could be to have a better chance at procuring business funding, also for tax purposes, additionally, there is liability protection associated with incorporating.
Incorporation for small business does vary from state to state. Fortunately, regardless of state, it isn't as complex as some might assume. And there are certain basic steps that every state essentially requires. Below is a brief overview of what's involved with turning your small business into a corporation.
As far as how long it takes to incorporate, the process could last anywhere from one to six weeks. Associated costs range from 100.00 to a couple thousand depending on whether or not you use the services of an attorney, and again the costs will also be based upon what state you live in.
Step 1: Understand Licensing and Zoning Laws
Every state and city for that matter will have its local zoning and licensing laws. Before becoming a corporation, you want to make sure you get any required permits and/or licenses. You also want to make sure that all relevant aspects of your business comply with the existing regulations.
Step 2: Check on a Name
A state will not allow you to use the same name as an existing business. If your current name isn't taken, then you should be fine. However, if there already is a corporation with that name, then you're going to have to choose a different one. Most states will have an online directory through which you can search to see whether or not the name you want for your company is already being used.
Step 3: Who is the Registered Agent
A registered agent is a person who can receive your company's official mail and documents. So for instance, if there's a lawsuit brought against the business, to whom will the legal paperwork go…You can choose to use your attorney. You can also simply use yourself, or additionally, perhaps choose a director or even an employee.
Step 4: Establishing the Articles of Incorporation
This is also known as a certificate of incorporation. Essentially, you will file this with your state and in turn, the corporation is now official. Among other elements, it will have the business name, address, registered agent, number of shares, and the name of the person who incorporated it. In most states, the articles of incorporation is a fairly straightforward and brief document. Some states, however, have different requirements; you thus may need to include an explanation of the purpose, names of those on the board of directors, and how long the corporation will last, among other components.
Step 5: File Articles of Incorporation
Once these are completed, they then need to be filed with your state. There will be a filing fee—this could range from 100 to 500 dollars. Your state's website should have the protocol for filing the articles of incorporation. If you're using an attorney, they will generally do the filing for you.
Step 6: Creating Corporate Bylaws
This is a document that explains the structure of the corporation. So for example, it'll contain information regarding shareholders, board meetings, how board members get replaced and so forth. There is also other information that many companies will include in their bylaws:
- How many shares can the corporation issue
- How will loans and other such monetary transactions be approved
- Financial audit information
- How will the articles be amended if needed
Not all states will require you to file your bylaws; however, you should keep them with all of your other important documents as they could be required for a variety of reasons, such as an auditor for loan purposes.
Step 7: Have a Records Book
This is that which shows you're now indeed a corporation and that you are in compliance with your state's regulations. It is comprised of all relevant documents tied to the corporation, to include such things as your articles of incorporation, bylaws, minutes of any meetings, any stock transactions, annual reports, documentation about business loans, real estate transaction records, among other things.
Step 8: Hold a Board Meeting
After having filed your paperwork with the state, you're just about there. Officially though you need to have your first board meeting to be a full-fledged corporation. At this initial meeting is where you adopt the articles and bylaws. You will issue stock shares, elect relevant corporate officers, and always be sure to keep your meeting minutes.
Step 9: Any Additional Federal and State Requirements
There will be a few things that need to be done after the fact. For instance, you need to apply to the IRS for an Employer Identification Number. You also will need to open a business banking account in the name of the corporation itself. Paying your corporate taxes is an absolute must now that you have incorporated. Additionally, you want to check with the state to see if there are any annual requirements as far as a corporation is concerned.
First Union Lending is in the business of helping small companies as well as corporations. Whatever your business entity, we have a business loan program to fit your needs. Call today to see how we can help you grow and succeed!