You have a new business, amazing! Now you want to cover your assets with a business structure that keeps you and what you own separate from your business. That’s the kind of peace of mind business owners need to succeed, which is why incorporating is a critical step in the beginning of any business venture. But the actual process of incorporating can be long and daunting. Even worse, entrepreneurs who decide to take the process on without the right counsel can make pretty expensive mistakes. To help you avoid that, here’s a step by step breakdown of forming your corporation.
1. Do a Name Search
Before you can incorporate, you have to check if anyone else in your state is using the same business name. Your attorney should include that as the first step in the incorporation process.
Make sure words like “Inc.” or “corp.” are included in the search, because you’ll want to add them to your official business name once you’re incorporated. This process reduces the likelihood of your documents being rejected by a state official.
2. Prepare the Articles of Incorporation
Most states refer to the formation document as the “Articles of Incorporation” or “Certificate of Incorporation.” These documents contain important information about your company, including:
- Company name
- Business purpose
- Registered agent
- Incorporator
- Number of authorized shares
- Share par value
- Preferred stock
- Directors
- Officers
Your Articles of Incorporation have to be executed by a person who is the “incorporator.” The Incorporator, who often is your attorney, will pass a resolution assigning all rights and duties to the board of directors.
3. Submit the Documents for Filing
In most states, the agency responsible for corporate filings is the Secretary of State. Note that every state has its own rules on the paper size, font size, number of copies, ink color, and other details, so make sure you know your Incorporator is familiar with the state’s requirements.
4. Approval
Getting your corporation approved can take up to three months. Your attorney should be able to expedite the process if necessary.
5. Receive Certified Documents
Once the state office has processed your documents, it will send them back to the address provided. This means you’re now a corporation! Get out the champagne!
6. Elect a Board of Directors
Once you’re incorporated, it’s time to elect a Board of Directors and assign rights and duties to the Board. Make sure your board is made of reliable people you trust to make important decisions for your company.
7. Issue Shares
The Board of Directors issues shares to designated shareholders. If there are other shareholders, now is the time to distribute those shares.
When you can proudly say “Inc.” at the end of your business name, things inevitably start moving forward for your business so much faster!