🔍

How to Start a Corporation - 5 Easy Steps - YouTube

Channel: TRUiC

[0]

- [Presenter] A corporation is a type of formal

[2]

business structure that is more complicated than an LLC,

[4]

but offers benefits that LLCs do not.

[7]

Corporations are great if you are looking to raise money

[9]

from venture capital or looking to list on a stock exchange.

[13]

Corporations are also able to more efficiently

[15]

carry money over between tax years.

[18]

If you are starting a business and not sure

[19]

which business structure is best for you,

[21]

check out our other video "Choosing The Right

[23]

Business Structure for your Business" linked below.

[26]

There are two ways to form a corporation.

[29]

You can form one yourself,

[30]

or you can hire a service to do it for you.

[32]

In this video, we will look at both options

[34]

and help you decide how to go about forming

[36]

your own corporation.

[44]

Remember, this video is not legal advice.

[46]

If you're unsure of whether your company should be a

[49]

corporation consult with an accountant or an attorney.

[52]

By forming a corporation on your own,

[54]

you can save yourself some money.

[55]

Let's start by looking at the steps

[57]

to form a corporation on your own.

[59]

Every state has slightly different requirements for forming

[61]

a corporation, but in general, you'll follow these steps.

[65]

One, choose and secure your corporation's name.

[68]

The name you select for your corporation will establish

[71]

its brand.

[72]

It's the first thing most people will learn

[73]

about your organization.

[75]

It's important to pick a name that both aligns

[77]

with your brand and follows the rules

[79]

of naming guidelines in your state.

[81]

You'll need to check your state specific naming

[83]

requirements, but you should follow these general rules

[85]

when choosing a name:

[87]

your name must contain the word corporation, company,

[90]

incorporated, limited,

[92]

or an abbreviation of one of these terms.

[94]

Your name cannot use the words, bank, trust,

[98]

trustee, credit union,

[100]

or other related words without approval.

[102]

Your name cannot include words that could confuse your

[104]

corporation with a government agency, such as FBI,

[107]

treasury, state department, et cetera.

[110]

The name must be distinct from that of any other corporation

[113]

in your state.

[114]

For more information on what makes a name distinct,

[116]

check out our other video,

[117]

How to Name Your Business linked below.

[120]

Once you have a name selected,

[122]

do a name search to make sure it's available in your state.

[125]

After doing a state name search,

[126]

you'll want to do a domain search to see if your name is

[128]

available as a URL.

[130]

Even if you don't plan on making a website today,

[132]

you may want to secure the URL so someone else

[134]

doesn't take it.

[136]

Two, choose a registered agent.

[138]

You must appoint a registered agent when you register

[141]

your corporation with the state.

[143]

Some States refer to registered agents as statutory agents,

[145]

resident agents, or agents for service of process.

[150]

The registered agent can be an individual in the company,

[153]

including yourself.

[154]

Or you can hire a professional service authorized to do

[156]

business in your state.

[158]

They will send and receive legal papers on your behalf.

[161]

These documents include official correspondence like legal

[164]

summons and document filings,

[165]

which your registered agent will receive and forward to you.

[168]

Your registered agent will also help remind you

[171]

to file the necessary reports.

[173]

Failure to properly maintain your corporation can result in

[175]

fines and disillusion so this assistance is valuable.

[179]

Designating someone else to serve as a registered agent

[182]

for your corporation has its benefits.

[184]

To learn more about hiring a registered agent service

[187]

for your corporation, read our

[188]

"Should I Use a Registered Agent Service Guide?"

[191]

linked below.

[193]

Three, hold an organizational meeting.

[195]

Before you officially file the formation documents

[198]

in step four, you'll need to hold

[200]

an organizational meeting to complete the following tasks:

[203]

create an approved bylaws,

[205]

select your initial directors,

[207]

determine your share structure

[209]

and execute an incorporator statement.

[212]

Let's break down each of these.

[214]

Create and approve bylaws.

[217]

Bylaws are the rules that determine how your organization

[219]

will be governed and run.

[221]

You can think about the bylaws as a constitution

[223]

for your corporation.

[225]

It makes the rules and priorities clear

[227]

for everyone involved.

[229]

A corporation's bylaws will supplement any rules set forth

[232]

by the federal government or the state.

[234]

In your bylaws, be sure to include how the corporation

[237]

will be governed, including the role of

[239]

directors and officers, how meetings are held,

[242]

voting procedures and how officers and directors

[245]

are elected, how records will be kept and managed,

[248]

how disputes will be handled,

[250]

how bylaws will be added and amended in the future,

[253]

the date of the annual shareholder meeting,

[256]

how to negotiate contracts,

[258]

fiduciary duties to the corporation,

[260]

such as acting in the best interest of the corporation,

[263]

and what constitutes a quorum for voting purposes.

[266]

Appoint initial directors.

[268]

You must appoint the state's required number of directors

[271]

until the first shareholders meeting.

[273]

A corporate director is in charge of the adoption,

[276]

amendment, and repeal of the operational bylaws,

[278]

as well as the election, supervision,

[280]

and removal of officers.

[283]

After forming the corporation,

[285]

the incorporators or initial directors,

[287]

if named on the formation documents

[289]

should call an organizational meeting.

[291]

During this initial meeting,

[293]

either the incorporators will elect the board of directors

[295]

or the initial directors will appoint the officers.

[298]

Choose a share structure and strategy.

[302]

A share of stock is the unit of ownership of a corporation.

[305]

Each share of stock represents a percentage

[308]

of ownership of the company.

[309]

For example, if a corporation issues

[311]

only one share of stock,

[313]

the shareholder or a stock owner would then own

[315]

100% of the corporation.

[318]

Shares can be structured into classes.

[320]

Each class termed as a share class,

[322]

holds different rights and privileges.

[325]

You can have multiple classes

[326]

and each class can hold any number of shares.

[329]

Some States only allow corporations to list

[331]

one class of shares on their provided formation document.

[334]

In these cases, you must either complete

[336]

an additional provision

[338]

or draft your own formation documents.

[340]

Check with your state for further instructions.

[343]

We recommend starting with a high number

[344]

of authorized shares.

[346]

Many attorneys suggest 10 million.

[348]

By starting with a high number,

[350]

you have the flexibility to issue shares as needed

[352]

without paying legal fees

[353]

to increase your initial authorized shares amount.

[356]

Create an executed incorporator statement.

[360]

The incorporators should sign an incorporator statement with

[362]

complete names and addresses of each initial director

[365]

and store it in the corporate records book.

[367]

This document names the initial directors

[369]

that will serve until the board of directors is elected

[372]

during the first shareholders meeting.

[374]

It should be stored with the rest of your corporate records.

[377]

Four, file formation documents.

[380]

You will need to file formation documents with your state.

[383]

Once the documents are approved,

[385]

you will have officially formed a corporation.

[388]

Most States provide the formation documents online,

[390]

while others require you to draft

[392]

your own formation documents.

[394]

The formation documents will cover

[395]

the basics of your corporation,

[397]

including your corporate name and principal address,

[400]

your registered agent's name and street address.

[403]

And the number of authorized shares

[405]

your corporation is allowed to issue.

[407]

As mentioned in the previous section,

[409]

some States only allow corporations to list one class of

[412]

shares in their provided formation document.

[414]

In these cases,

[415]

you must either complete an additional provision or draft

[418]

your own formation documents,

[420]

check with your state for further instructions.

[423]

- Five, get an EIN.

[425]

Lastly, you'll need to get

[427]

an employer identification number, or EIN from the IRS.

[431]

Also known as a federal tax identification number,

[433]

Your EIN is like a social security number

[436]

for your corporation.

[437]

An EIN is how the IRS tracks your business for tax purposes,

[441]

but it's also necessary to open a business bank account and

[444]

legally hire employees.

[446]

The good news is that EIN's are free and can be quickly

[448]

obtained by visiting the irs.gov website.

[452]

For more information on EINs,

[453]

check out our other video linked below.

[456]

Now that you know all the steps

[457]

to forming a corporation on your own,

[459]

maybe you don't want to go through the process by yourself.

[462]

Let's take a look at the other way to form a corporation.

[465]

Hiring a professional service to file your forms

[467]

and act as your registered agent for the corporation

[469]

will cost you an additional 50 to $150.

[473]

However, there are several benefits

[474]

to working with a pro.

[476]

A hired registered agent helps with

[478]

getting your reports filed on time,

[480]

helps you stay organized by keeping your business mail

[482]

separate and it's available at all regular business hours

[485]

to accept official mail and legal papers

[486]

on your corporation's behalf.

[489]

A final and important additional benefit

[491]

to using a service is privacy.

[493]

A professional service will provide a level of privacy

[495]

by withholding your personal name

[497]

from the corporation's contact information.

[499]

There are many reasons why you might not want your personal

[502]

information easily accessible

[503]

and associated with your business.

[505]

Hiring a professional corporation formation service

[508]

is an easy way to accomplish this.

[511]

If you want to form a company that can issue stock,

[513]

raise money through investors or efficiently carry money

[516]

over between tax years.

[518]

Then a corporation is the right business structure for you.

[521]

Now you know all the steps to form a corporation.

[523]

For a more detailed guide, visit our site at

[526]

howtostartanllc.com.

[528]

Give the video a like if you found it useful,

[530]

and subscribe if you'd like to see more.

[532]

If you have questions or encounter any roadblocks,

[534]