How do I Form a Corporation?

Jessica Ellis
Jessica Ellis

A corporation is a business structure that grants a company a certain degree of legal status and rights. Forming a corporation is an important step for many businesses, as choosing this route of structure will determine who makes decisions, how they are made, and how the business interacts with government agencies. There are legal and practical steps necessary to form a corporation, but be sure to check with all local laws. Some regulations may vary depending on region, so careful attention to applicable laws will ensure the most efficient and legal formation of this type of company.

Businessman giving a thumbs-up
Businessman giving a thumbs-up

Corporations must have names that identify them as such, typically ending in the terms “limited,” “incorporated” or “corporation”. Generally, the names must be original and avoid copyright infringement. Choosing an appropriate name will be an early step, as all the paperwork needed to form a corporation will require declaration of the company name.

Next, directors and board members must be appointed. As the major operators and decision makers of the company, these directors will be involved with company decisions from formation onward. The owner of the company will likely be a director, but not all directors need to have ownership in the corporation. Directors may include a chief executive officer, a chief financial officer, and a company president.

After the board of directors is selected, legal paperwork must be filed to form a corporation. Typically, the company is subject to the filing laws in the region where the corporation is headquartered. Exact filing requirements may vary between regions; many experts recommend hiring attorneys to ensure paperwork correctly meets local standards. The paperwork needed to form a corporation is often referred to as articles of incorporation or charters. Additional legal requirements needed to form a corporation may include operational permits, copyright and trademark applications, and any licensing required to legally operate.

Once a corporation has been granted legal status by regional law, the directors can implement plans for the company. This may include the creation of bylaws, a constitution of sorts that dictates distribution of power, dispute resolution, and how the company will be operated. Most corporations also choose to issue stock to directors and investors, making them part-owners in the company. Generally, a corporation cannot receive legal status unless stock is issued in some amount.

The success of a corporation may hinge on the attention to detail during the formation. Ensuring a comprehensive and fair list of bylaws, choosing experienced and trustworthy directors, and carefully reviewing legal guidelines can all help a new corporation avoid trouble in the future.

Jessica Ellis
Jessica Ellis

With a B.A. in theater from UCLA and a graduate degree in screenwriting from the American Film Institute, Jessica is passionate about drama and film. She has many other interests, and enjoys learning and writing about a wide range of topics in her role as a wiseGEEK writer.

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