How To Form A Corporation
By: lawinc | Posted: 15th October 2010
Your company has grown -- now it's time to upgrade your legal structure to something that will protect you and your assets, as well as provide other benefits. In other words, your business is ready to become either a corporation or a limited liability company.
Unlike partnerships and sole proprietorships, corporations and LLCs are legal business entities, separate from their individual owners and members. When you incorporate online, you acquire personal protection from the debts and obligations of your business.
Partnerships and sole proprietorships do not provide limited personal liability for business debts. Creditors of these businesses can go after the owners' personal assets to collect business debts. Organizing and operating a partnership or sole proprietorship is much easier than forming a corporation because there is little formal paperwork required.
A process server arriving at your place of business may not necessarily be discreet when serving you with a formal legal complaint. Besides being unnerving, you may also not want customers or employees to be witness such an event. That's one reason companies use third parties as registered agents.
Before you begin doing business, you need to obtain the required licenses and permits that anyone needs to start a new business. Among the licenses and permits you may need to obtain are a business license and, if your corporation will?sell products,?a seller's permit.
This packet should include sample or fill-in-the blank articles of incorporation and your state's nonprofit corporation laws. It should also contain a filing fee schedule, as well as forms and instructions for checking the availability of your proposed business name. Contact your state's corporate filing office to obtain this packet.
A sole proprietor is someone who owns an unincorporated business by himself or herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation.
Issuing shares of stock distributes the ownership interests of the corporation. You should not do any business as a corporation before issuing stock, and all stock issuance must comply with securities laws.
It is not always necessary to form the corporation in the business' home state. Often, to avoid excess taxes and regulation it is not uncommon to incorporate a business in the most agreeable state. When learning how to form a corporation, you can also learn what state makes the most sense for you.
In addition to confirming that another corporation in your state isn't already using your proposed name, you must make sure your name won't violate a trademark owned by another company (in your state or out of state). To do this, you'll need to conduct a trademark search.
You own a family business and you want to begin making gifts of ownership or shares to your family as part of your financial or estate planning or to plan for the next generation of owners. With a corporation you can easily make gifts of shares in your company without necessarily giving up management control.
Directors make major policy and financial decisions for the corporation. For example, the directors authorize the issuance of stock, appoint the corporate officers and set their salaries, and approve loans to and from the corporation. Directors are typically appointed by the initial owners (shareholders) of the corporation before the business opens.
Unlike a regular corporation, a limited liability company with one member may be treated as a disregarded entity, so the member is often singled-out as a person performing the actions of the LLC.
You'll know how to form a corporation in any state without the aid of a lawyer thus saving thousands more. You'll understand which business entity provides the best protection against legal predators, and which do (and do not) provide effective tax shelter
Lawinc. Is a website that Form a California S corporation, California LLC, Corporate Minutes or Register a Trademark. Start a California Small Business Online Now. LawInc.com
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Tags: sole proprietor, limited liability company, personal assets, sole proprietorship, sole proprietorships, personal liability, business debts, articles of incorporation, legal structure, business partnerships, process server