The Basic Incorporation Process

Almost anyone can create a corporation – and that is a powerful option for many small business owners. While corporations have a far greater number of legal rules to comply with, they also provide far greater protection.

Incorporation is a process controlled by the individual state, so you will want to consult your state’s or province’s statutes to make sure that you are in complete compliance. This article will just cover the basics for incorporating in the U.S.

photo credit: Simon Holland

Choosing a Name

The corporation name is essential because that is its legal name. In the United States, business incorporation process is treated as a legal entity or legal person, meaning that it is entirely separate from the owners. The name must be unique from other corporations in the state, and it should not be too close to any other larger corporations. For instance, you could not name your store “Wall-Mart.” It’s too close to Wal-Mart.

Requirements for the Formation

If you want to form a corporation, you need incorporators, the articles of incorporation, and a filing of the articles of incorporation with the Secretary of State.

In most states, the Articles of Incorporation need to include your corporate name, address, the purpose and duration of your corporation as well as the capital structure. You will also need to have a registered office and agent in your state of incorporation. Remember that you don’t have to incorporate your corporation in the state where you live. You can choose to incorporate in a state where you do most of your business or another one entirely. Many corporations choose to incorporate in the state of Delaware because the corporate laws are friendlier toward corporations in general.

Who Sends the Paperwork

Applications can be filed in a variety of ways, and you can choose different individuals to file them. Remember though that the requirements for formation do not change based on the application chosen.

The most common method is to fill out the application yourself. You can do this through picking up the forms at your local courthouse, or, in some states, you can fill out the form online. Some online forms offer faster turnaround and response times as well as additional perks, so check out your particular state’s requirement. Other states allow the application to also be mailed in or faxed while a few even permit telephonic applications. Aside from state fees, this is the least expensive option.

Another method is to hire an Incorporation Service Company to handle all of the paperwork, pick up the forms, and get everything in order. Advice is usually not included in this price, meaning that they will not inform you whether you are on the right track with your paperwork or whether the corporation will run in to problems on down the road.

The third and most expensive option available for you is to hire a lawyer. Attorneys offer the added benefit of providing counsel with their filing, which can help you to avoid any potential pitfalls later on down the road.