Whatever your reason for wanting to incorporate—whether it's for liability protection, tax benefits, improved access to capital, ability to issue stock—setting up a corporation isn't difficult.
In fact, the process can be accomplished in just three easy steps.
1. Select and reserve a name for your business entity
The first step in the incorporation process involves selecting a name for your corporation. Typically, the "catchier" and more memorable your business name, the more likely it is that consumers will choose your company's goods or services over other competitors.
Using keywords associated with your main product or service in your business name is also a wise maneuver, and will make your company easier to find online.
After you have selected a unique name for your corporation, you'll need to conduct a business name search through the secretary of state, department of state, or division of corporations—or other comparable governmental agency that performs business name searches in your state.
The purpose of the name search is to ensure that you haven't chosen one that's already being used because you can't copy corporate names.
Assuming the name search doesn't reveal any overlap, you'll want to reserve the name so that no other business entity claims it. Ordinarily, the secretary of state will hold your intended corporate name for a period of about 120 days if you pay a fee.
2. Retain a registered agent
Most states require every business entity to appoint a registered agent and list the registered agent with the secretary of state or division of corporations. A registered agent—also known as a "statutory agent"—is an individual over the age of 18, a company, or other business entity authorized to receive notices, official mail, and legal documents, and to accept service of process on behalf of the corporation in the event a lawsuit is filed against the business entity or organization.
The registered agent must have a physical street address in the state where the principal place of business of the entity is located.
If the business is physically located in the state where the entity was formed, the business itself may serve as its own registered agent. However, if the registered agent is other than the entity itself, the registered agent must be a representative authorized by the business to act in that capacity.
The registered agent will ensure that the initial incorporation fees are paid and that annual corporate filings are made on time, including the annual statement. They will also be responsible for paying ongoing fees and costs, such as corporate taxes, and other filing fees.
3. Prepare and file articles of incorporation
The final and most significant step required to incorporate your business involves preparing and filing all required incorporation paperwork with the secretary of state or comparable governmental agency. Although the incorporation forms and the process that needs to be followed may be slightly different in each state, corporations must typically file so-called articles of incorporation. These are also referred to as articles of association, certificates of incorporation, or certificates of formation depending on the state where the incorporation documents are filed. The articles of incorporation can be prepared with or without the assistance of an attorney.
The articles of incorporation constitute the charter and legal framework for the corporation, and typically contain:
- The name of the corporation
- The name of the corporation's founder (or "incorporator")
- The corporation's principal place of transacting business
- The legal purpose for which the corporation is being formed
- The names and addresses of the founding members or directors
- The name and address of the registered agent
- The authorized signatures of the directors and founders
The individual who ultimately applies for incorporation with the secretary of state is typically—but not always—the corporation's founder, who must generally obtain the consent of the initial directors of the corporation.
Once the articles of incorporation are approved by the secretary of state, they become public documents which may only be amended in accordance with the incorporating state's statutory provisions.
The articles of incorporation are separate and distinct from a corporation's bylaws, which are the agreed-upon rules, regulations, and procedures for the management, operation, and overall functioning of the newly-formed corporation.
All mandatory incorporation fees must be paid during the incorporation stage, and it should be noted that fees vary from state to state.
It's possible to incorporate without using a business attorney, but it's advisable to contact an attorney or a certified public accountant who can help you prepare and file incorporation documents.