Steps to Form a Company: Everything You Need to Know
The steps to form a company can be complex when choosing to incorporate under the Subchapter C of Chapter 1 of the IRS code.3 min read
The steps to form a company can be complex when choosing to incorporate under the Subchapter C of Chapter 1 of the IRS code. A corporation is its own entity distinct from its owners who are shareholders. This structure helps to protect the owners from incurring personal liability from the business. A corporation is subject to the corporate laws in the state where the business was incorporated.
Steps to Forming a Corporation
There are several steps that must be completed when you decide to form a corporation.
- Choose a legal business name: You must register your business name with the Secretary of State's office in the state where you wish to do business. Most states allow you to reserve a name for a fee while you are waiting to file your Articles of Incorporation, though it is for a limited time, often 30 days. If you do not register your company in the time frame, the name will become available again to the public.
- File your Articles of Incorporation: You will need to draft and files your Articles of Incorporation with the Secretary of State's office. You can choose to have an attorney draft them or complete them yourselves. The articles will need to have the name of the initial officers and directors who will run your corporation.
- Issue stock certificates to the initial shareholders: After your articles have been approved by the Secretary of State, you will need to distribute your stock certificates to the initial owners of the company based on their number of shares.
- Apply for business licenses and permits: You will need to obtain any required business licenses or permits that are required for you to operate in your chosen industry. You may be required to file for state and local licenses as well as federal ones.
- Apply for an Employer Identification Number: If you plan to hire any employees, you will need to file a form SS-4 with the Internal Revenue Service to obtain an EIN. Your EIN will serve as your company's tax identification and will be used for reporting employee wages. You may also be required to have an EIN to open a business bank account or applying for a loan.
- Apply for state or local identification numbers: If required, you will also need to file for any state and local identification numbers that are necessary for the payment of disability, unemployment, or other payroll taxes. If you are unsure of the state and local requirements, seek out the advice of an attorney.