A corporation is a business structure that is considered a legal entity separate from its owners, who are known as shareholders. Corporations can own assets, make profits and be taxed. This legal distinction protects its owners from personal liability, but it also increases the cost to start and maintain a corporation as well as requires more rigorous record-keeping and reporting.
Incorporating a business will require you to draft and file articles of incorporation, which are also sometimes called charters or certificates of incorporation. The article will serve as a corporate birth certificate and officially establish the existence of your corporation. You will also need to draft corporate by-laws, which are the internal rules and regulations of your corporation. These documents stipulate how meetings will be conducted, voting requirements for making decisions, and other logistics of how your corporation operates.
Once you have drafted your by-laws and held an organizational meeting, it is time to appoint an initial board of directors and issue stock. The initial board will be responsible for the initial formalities of your corporation and will also set up the corporate fiscal year. It is important that all board meetings are recorded to keep records of the activities of your corporation.
It is also a good idea to draft and execute a shareholders’ agreement, which is an optional document that outlines how ownership will be transferred in the event of a death, disability or departure of a shareholder/owner. You will also want to obtain any licenses or permits required by law for your type of business, such as a zoning permit.