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Forming a corporation

Posted by Logan Marshall on August 25 in 0. PreBusiness Considerations |

The different business structures.

When starting a new business it is important that you make decisions based on your own circumstances and exactly what you want from your business. One of the first decisions you will need to make is the type of business structure to incorporate. There are basically 4 types of structure you can choose from. A sole proprietorship gives the owner of the business complete control over all managerial aspects and also complete liability over any profits and losses.

A partnership works in a similar way but consists of two or more owners. The limited liability company is fast growing in popularity because it allows for profits to be passed through to the owners but goes some way to shield them from the liability they may ordinarily face from company losses. A corporation becomes a legal entity and is completely separate from the people who set the business up. A single person can set up a corporation, there does not need to be more than one founder. The founder or founders are not responsible for any liabilities that the corporation may incur, however, it incurs a large set up cost and masses of record and book keeping.

The first steps in starting a corporation.

The first steps you need to consider when setting up a corporation include deciding on a business name, appointing directors of the company, file formal paperwork, create corporate rules and regulations, have the first board meeting and issue shares to the directors. This may seem like a lot of work but most of them are things you should have been considering doing anyway.

Deciding on a business name is part of corporate branding and will soon become very important to the success of your company. Don’t just dive straight in with the first name that springs to mind and make sure that the name you want isn’t already registered to another company. Appointing directors would normally be a formality because the founders of the company will ordinarily become the directors to start off with and each will usually receive a similar number of shares.

Filing formal paperwork.

The formal paperwork you need to complete are normally called ‘articles of incorporation and will need to be filed with your state’s corporate filing office. Articles of incorporation are normally very easy to complete and can take less than an hour. As well as details regarding the company you will need to include the details of one person who will act as the registered agent for your corporation.

Corporate rules and regulations.

The corporate rules and regulations you set are called corporate bylaws and they govern the actions and running of the corporation. Corporate bylaws are legally binding and in order to ensure that they are done properly you may want to hire a state lawyer who is well versed in these cases.

This may seem like a lot of work to set up a corporation, however, if you were to set up a partnership instead you would do a similar amount of work but with a corporation it is a requirement and not a necessity.

http://contracts.consusgroup.com/categories/kicat_38_1_google.asp?ref=_google.asp&aw=1281 offers a reasonably priced way of obtaining bylaws for your corporation. It has examples that other major corporations use for you to purchase and use yourself.

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