A corporation is a business entity that is legally separate from its owners. It is often perceived as more professional or legitimate than other business structures, such as a general partnership or sole proprietorship. Corporations can raise capital through the sale of stock shares, and are governed by state and federal laws. They must also regularly report financial information to shareholders and the government.
While incorporating is not required, it is generally recommended for companies seeking to grow and establish long-term stability. It provides the added benefit of limited liability for its shareholders. This means that the only personal assets a shareholder can lose in a lawsuit are those invested in the corporation, as opposed to any debts or other obligations of the company.
Incorporating a business requires filing articles of incorporation with the state where you plan to operate. The specific requirements vary by state, but most require you to include basic information like the name of your company, how much stock you are authorized to issue, and the names of its directors. You may also be required to draft corporate bylaws, which dictate how the corporation is run and how board meetings are conducted.
After incorporating, you will need to obtain an employer identification number (EIN) from the IRS and open bank accounts. You should also appoint a registered agent to receive legal and tax documents on behalf of the corporation. Once your articles of incorporation are approved, you can hold an organizational meeting to appoint a permanent board and adopt initial bylaws.