You’ve got ideas, funding, and people to start a business, but do you know how to incorporate a company? While incorporating is a big step in your small business’s journey, it’s likely to be challenging for entrepreneurs unschooled in business incorporation. Besides, attracting lenders, capital, vendors, and customers, you and your stakeholders are likely to enjoy tax benefits and liability protection when your business is organized as a ‘Corporation’. That’s why it is crucial to learn ‘How to Incorporate a company’.
First thing first, the process of incorporating a business can differ based on the nature of the business and where you are starting a business. Considering vital aspects of a startup, we break down a list of 5 simple & quick steps to incorporate a company.
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What is an incorporated business?
Simply put, incorporation is the process of registering your company as a corporation. Unlike sole proprietorships and partnerships, corporations are controlled by 3 different parties—investors, directors, and officers. Investors own the corporation by holding stocks and building a board of directors, who takes decisions on matters related to policy and management. Later the board votes in for officers (SEO, CFO, secretary, etc.) who are responsible to manage day-to-day business operations.
Small businesses can consider incorporation for multiple reasons, including expansion, operational efficiency, and liability protection as well. If you want to leverage the benefits of incorporation, here’s how to incorporate a company.
1- Start With Naming Your Business
The process of incorporating your company starts with securing a name for your business. Luckily, all the 50 states in America have online databases where you can find and register for your proposed business name if it is available. It will hardly take one search to find a suitable name for your business.
Editor Tip: Most state secretaries would offer their option to reserve your business’s name, but don’t go with their suggestion. It will slow down your incorporation process by demanding proof of your name prior to filing other state documents.
2- Formulate All Governing Documents
If you are converting your small business to a corporation, you will need to submit governing documents that are also known as corporate bylaws. If you are incorporating into LLC, you’ll need to submit LLC operating agreements.
These bylaws and agreements are not often shared with the state government. Instead, they will be used internally as formal guidelines for dispute management, ownership percentages, losses & profits.
In case, your company has two or more owners, governing documents will be extremely vital. The best way to create government documents is to sit with your partners and clear all these things efficiently.
Editor Tip: Hiring an attorney for creating corporate bylaws can be really expensive. But, you don’t have to worry about it. Luckily, there are plenty of free corporates and LLC operating agreement templates available online.
3- Finish Your Paperwork
That where your company will finally incorporate with the state and capitals.
While doing paperwork for starting a business can be mentally exhausting and demand expertise, most U.S. states have simplified the process by providing a free downloadable PDF copy of the articles. However, you need to fill them and submit them physically, but in some states, you can do your paperwork online as well.
The information you need to finish your paperwork may vary depending on the state you’re settled into. Typically, you are likely to ask for some basic information about your company’s name, mail address, registered agent name and address, purpose, and the same for your company’s director as well.
Once you file the incorporation articles to the Secretary of State’s Office, they will soon send you a certificate or a receipt supporting your business’s legal existence.
Editor Tip: If you are in a hurry and need Corporation and LLC formed quickly, you can opt for expedite services offered by most states.
4- Organize a Meeting
While you are reading on how to incorporate a company, you must keep in your mind that one of the most vital aspects of business incorporation is to hold a meeting and document the fundings of the LLC or Corporation. In this meet, you’ll have to record the names of the people who will be in charge of exchanging money, assets, or services for partial partnership along with the percentage in the company of each person.
Editor Tip: The meeting is likely to be wrapped around LLC memberships, certificates, and share documentation. So, it is essential to have everyone’s signature on the bylaws or operating agreement with other initial resolutions.
5- Apply for an EIN
Almost all businesses need a Federal Employer Identification Number (EIN or FEIN). Fortunately, the process of acquiring an EIN number is easy and quick, if you apply for an EIN online through the IRS website.
The form available there is short and easy to fill. Also, the information required is simple. You just need to know your social security number, what kind of entity you’re forming, and your fiscal calendar year. That’s all you need to get an EIN number.
If you’ve gone through all these above steps, congratulations, you’ve learned how to incorporate a company.