Start a Corporation

Starting a corporation not only helps take your business to the next level, but it can offer liability protection for owners, the opportunity to issue stock, and more. Depending on your business needs, incorporating might just take your company where it needs to go. Below, we’ve answered some common questions to help no matter your corporation needs.

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What Is a Corporation?

A corporation is a type of business entity formed at the state level. Corporations can be either for-profit or not-for-profit (although most corporations are for-profit). In the eyes of the law, corporations are seen as individuals, with the right to sue, be sued, and hold assets. Different from individual people, however, corporations can theoretically live forever.

A corporation’s owners are called shareholders, and corporate ownership is divided into shares of stock. The percentage of shares a shareholder owns is usually proportionate to how much of the business they own—50% of the shares equals 50% of the business.

Corporations provide limited liability protection for shareholders. This means that if creditors come to collect a corporation’s unpaid debts, or if a corporation is sued, shareholder assets will be off the table.

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How to Incorporate a Business

There are several steps involved when it comes to incorporating a business and setting it up for business success.

What does it mean to incorporate a business?

Incorporating a business is how a corporation is formed. As it relates to corporations, “incorporate” is simply a fancy way of saying “form” or “start.”

Incorporation occurs after your Articles of Incorporation are filed with the state in which you conduct business.

What steps go into starting a corporation?

Starting a corporation involves numerous important steps. We’ve broken down the essentials below:

  • Name your corporation
    Before naming your corporation, you need to make sure the name you want is available. All states have a database you can search to find out if your desired name is already in use.
  • Appoint a registered agent
    A registered agent is a person or entity who accepts official documents and service of process on behalf of your business. Most states require corporations to appoint and maintain a registered agent. Sometimes called resident agents, statutory agents, or agents for service of process, registered agents must be available during business hours at the physical address listed in your articles.
  • Submit Articles of Incorporation
    For your corporation to become official, Articles of Incorporation must be filed with the state. Your articles must be accompanied by payment, as well, though states designate their own amounts. Skip ahead to the “Filing Articles of Incorporation” section to learn more.
  • Draft corporate bylaws
    Corporate bylaws are the rules that set forth how a corporation operates. While they rarely need to be filed with the state, bylaws are commonly required by state law and help corporations achieve smooth business operations.
  • Hold an organizational meeting
    An organizational meeting is the first meeting your corporation holds. It’s where bylaws are adopted, officers are appointed, and shares of stock are issued. Many states require by state statute that an organizational meeting be held, so be sure to take meeting notes.
  • Get an EIN
    EIN stands for Employer Identification Number. Often required before you can open a business bank account, EINs are issued directly from the IRS.
  • Open and fund a bank account
    Mixing personal and business finances is an easy way to lose liability protection. You’ll want to open a business bank account to deposit money from shareholders, pay business bills, and more. Depending on your bank, you may need to provide your Articles of Incorporation, bylaws, and EIN in order to open a business account.

Incorporating a business can be a confusing process.

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Filing Articles of Incorporation

Before your business can become a corporation, it must be registered with the state by filing Articles of Incorporation. While you may have a legitimate business prior to filing Articles of Incorporation, the limited liability gleaned from corporation-status will not apply.

What information do I need to include in the Articles of Incorporation?

Each state has their own rules regarding what information needs to be included in Articles of Incorporation. Below, we’ve outlined some of the most common pieces of information articles ask for.

  • Business Name
    You’ll usually need to include the word “Incorporate” or “Corporation” or an abbreviation like “Inc” or “Corp.”
  • Duration
    Most corporations don’t have a set end-date, but if you want yours to, you’ll list that here.
  • Effective Date
    The effective date determines when your business will be officially incorporated with the state. Most corporations are formed ASAP, but if you want to set a specific effective date (usually up to 90 days in the future), you can indicate that here.
  • Registered Agent Name and Contact
    In states where a registered agent is required, you’ll need to list them in your Articles of Incorporation along with contact info, including a physical address. Your registered agent can be you, another member of your corporation, or someone else entirely, as long as they have a physical address in the state where you conduct business. Or, you can hire a commercial registered agent instead.
  • Authorized Shares
    How many shares is your business divided into? You’ll list that here. For stock corporations, you’ll typically need to authorize at least one share. Some states may require additional information, such as share classes (if you have multiple).
  • Incorporator
    The incorporator is whoever signs and submits the Articles of Incorporation. This might be a shareholder. Or, if you hire a business or attorney to submit your articles, they’ll sign instead. Incorporator contact information may be required as well.

Where do I submit the Articles of Incorporation?

It depends on the state. Many states have you file with their Secretary of State’s office. Some states have designated a different filing location, such as Michigan’s Department of Licensing and Regulatory Affairs.

How much is it to file Articles of Incorporation?

The Articles of Incorporation fee tends to hover around $100, though it varies by state.

In Pennsylvania, for example, Articles of Incorporation cost $125 to file. In Oklahoma, it’s $50 to file if you have up to $50,000 in authorized capital. Tack on an extra $1 for every additional $1,000 in authorized capital.

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Maintaining a Corporation

Once the state files your Articles of Incorporation, your corporation is officially created. But maintaining your corporation requires more paperwork and fees.

What is an annual report?

An annual report is an informational document you file with the state, usually submitted to the same office where your sent your Articles of Incorporation. Annual reports update or confirm business information, such as your registered agent’s address or other contact information.

Nearly all states require corporations to submit some form of regular state report, though they may come in the form of annual, biennial, periodic, or decennial reports. Reporting requirements vary widely—some forms can be easily completed in minutes while states like Alabama and Arkansas combine their reports with state tax forms.

Along with your report, payment will be due. Amounts vary by state. In Oregon, for example, domestic corporations will owe $100 each year while foreign corporations will owe $275. In New York, the annual report payment is just $9.

Do corporations pay taxes?

Yes. Corporations must pay federal income tax, and in many states, a state-imposed income tax as well. Corporations may also be subject to sales taxes, property taxes, and other state and local taxes.

Start a Corporation FAQs

When is the right time to start a corporation?

There is no tried and true “right” time to form a corporation. But as a general rule, the more profit and risk you’re dealing with, the greater the need for incorporation. You should also consider incorporating if you want to bring in investors. Since corporate ownership is divided into shares of stock that can be sold, corporations tend to be a more attractive investment to outside parties than other business entities might be.

How long does it take to start a corporation?

How long it takes for your corporation to form depends on your how long your state takes to file Articles of Incorporation. Some online filings are processed immediately. Many states offer expediting options that take a few hours. Unexpedited filings in states like Maine and Pennsylvania can take weeks to process.

How much does it cost to start a corporation?

Most states charge in the neighborhood of $100 to file Articles of Incorporation. Of course, actually getting your business off the ground can cost many thousands of dollars (or more).

What are shares?

Shares are units of ownership in a corporation. They are what a corporation is divided into to determine ownership percentage. A corporation’s owners are called shareholders—as such, they hold shares.

What are bylaws?

Corporate bylaws are the guiding rules and principles that help your corporation run. Bylaws might speak to everything from how often meetings will be held to how to handle a shareholder’s departure.

What is a board of directors?

A board of directors is a group of people who meet regularly to help operate a corporation with shareholder interests in mind. Boards are elected by shareholders, and nearly all corporations must have one in place. Unless explicitly banned in the bylaws, board members can also be shareholders (though they do not have to be).

What’s the difference between a corporation and an LLC?

Corporations and LLCs are both business entities formed at the state level that provide limited liability to owners, but they differ in several important ways. LLCs and corporations are taxed differently by default, divide ownership differently, and have differing management structures. To learn more, visit our Start an LLC page.

What is a foreign corporation?

A foreign corporation is one that operates in a state other than where it first incorporated. For example, if a business incorporates in Oregon, and later files articles in Washington and California, it would be a domestic corporation in Oregon and a foreign corporation in WA and CA.

Is the information in my Articles of Incorporation publicly available?

Yes. Your Articles of Incorporation is a public filing, meaning the information you provide is available to the public.

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