To Create a Corporation: Everything You Need to Know
To create a corporation, you'll need to go through a number of important steps and it's recommended to hire a lawyer to assist you in the process.3 min read
To create a corporation, you'll need to go through a number of important steps. It's recommended to hire a lawyer to assist you in the process, as it can be rather difficult to do on your own.
What Is a Corporation?
A corporation is a specific kind of business structure that is a legally distinct entity separate from the finances of its shareholders and owners. Just like an individual sole proprietor, corporations can own assets, enter into a contract, loan money to other parties, and hire employees. Unlike an individual sole proprietor, no single person will be held liable for any of the corporation's legal obligations or debts.
However, that benefit does not come without a price. Corporations have extremely complicated administrative and legal requirements, meaning the corporation designation is typically only used by bigger companies, such as Microsoft or Coca-Cola.
Because each state sets their own rules regarding corporations, this also makes it tricky to operate as one. Most states do require corporations to file an articles of incorporation, which defines the company's policies and guidelines and acts as a document of creation for the corporation. After filing this document and paying a fee, the corporation can then receive an official certificate of incorporation from the state.
Steps to Forming a Corporation
There are several steps to take when you decide to form a corporation:
- Choose your name. This will help define your company and set it apart from other businesses. Depending on your state, you may need to include the word "limited," "incorporated," or "corporation" in your name.
- Check to make sure your name is available. If another company is using an exact or similar name, you may not be allowed to register it with your state.