How to incorporate

In the world of business, a corporation is an entity that stands alone, separate from those who own and manage it. To incorporate is to go through the mechanical process of forming a corporation. The reasons a business, church, or organization may decide to incorporate are many, but the biggest advantage is to divert any personal liability. The process of incorporating is rather simple and has both advantages and disadvantages.

To incorporate a business, the owner needs to give the business a name under which it will form a corporation. The name must then be registered with the state where the business or organization operates. Government offices within said state will require filing of specific forms, usually referred to as articles of incorporation, and will charge a filing fee. The actual process and fee will vary from state to state as they pertain to the laws of that state. From there, federal tax forms will also need to be completed.

When a business incorporates, it will have to take certain steps to comply with state and federal business laws. A board of directors will have to be formed and the initial board members will have to be appointed. The first board meeting should include discussion and decision on the next requirement, which is to create corporate bylaws. The corporate bylaws will define the rules under which the business will be ran.

Licenses and permits of a specific nature may or may not need to be obtained depending on the type of business and what the laws of the state require. Stock certificates may be issued to the initial owner(s) of the business and other shareholders may also be included. These are all the formalities of incorporation.

While there are many advantages of incorporation, it does create a significant increase in paperwork and operation procedures. It is in any businessís best interest to research and compare the advantages and disadvantages before reaching a decision and to carefully consider the tax laws and how they will apply to the corporation. While it is entirely possible for a business to incorporate without an attorney, in some situations it may be best to consult a business attorney to discuss taxes, the formation of bylaws, and other legal aspects that pertain to liability.