Let’s discuss how to form a corporation. First, we need to define what it is. A corporation is an entity or an “artificial individual” formed to legally conduct or operate a business.
Disadvantages
It is more costly to set up a corporation compared to other business structures. It extensively requires a tedious task of reporting and documenting operations for record-keeping purposes. Although this may be true, it can make a profit. It also gives the best protection from personal liability to its owners.
Advantages
If the company incurs debt, the individual owners will not be held liable.
Why Nevada?
Nevada is the best place to form a corporation. It offers the best incentives for business tax breaks and liability coverage.
Make sure to attach an abbreviation of Incorporated in a form of “Inc.,” “Company,” or “Corp.” This is so the organization can be declared as a separate entity
Make sure to conduct a business entity search before you process your registration with the Secretary of State
Reserving A Name
While you are on the process of completing your registration via SilverFlume, you may reserve a name by filing a Name Reservation Request form for 90 days with the Nevada Secretary of State and you have the option to have it processed online or via mail for a $25 filing fee.
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Prepare and File Articles of Incorporation
Filing of Article of Incorporation
Setting up a Corporation in Nevada won’t be possible without going through the process of preparation and filing of the articles of Incorporation to be submitted with the Nevada Secretary of State via online service or by mail.
What It Includes
The articles of Incorporation include the following documents:
a) The Corporate Name and Address
b) The Name, Address, and Signature of an agent for service of process
c) The Number of shares that the corporation is authorized to issue
d) Names and Addresses if the board of directors and the incorporator
Filing Fee
The registered agent must complete and sign a certificate of acceptance and the filing fee depends on the number of shares that the corporation is authorized to issue with a minimum fee of $75 for 75,000 shares or less.
Note that a month after the articles of Incorporation have been filed, the forms for the Initial List of Officers, Directors, Registered Agent, and State Business License Application will be mailed to you upon the organization of your corporation and must be submitted for filing with the Secretary of State for a fee of $125.
Corporations in the State of Nevada must have an agent for service of process in the state which can either be an individual or a corporation who is a resident of or a business entity that is authorized to do business in Nevada and agrees to accept legal papers on behalf of the corporation.
The Agent Must Have A Physical Address
The registered agent should have a physical street address in Nevada and in agreement to accept service of process on your corporation’s behalf prior to becoming your agent.
Setting up a Corporate Record book for keeping the corporation’s important documents that include the stock certificates, stock certificate stubs, as well as the minutes of the shareholder and the director’s meetings.
What To Use
You can use any kind of corporate records book, such as a three-ring binder and you can also get a special corporate records kit through a supplier.
Helpful Links
Make sure to keep this record book at the principal office of your corporation For more information, click the link on How to Createand Maintain a Company Records Book.
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Prepare Corporate Bylaws
Basic Ground Rules
A Corporate Bylaw is set to serve as the basic ground rules for operating your corporation which must be stated in an Internal Corporate document to organize the company’s internal management and establish the rules and responsibilities for shareholders, directors, and officers.
Importance
This internal document is not a legal requirement and it doesn’t have to be filed with the state but it is highly recommended for the following reasons:
a) Establishes the corporations operating rules and
b) It brings more credibility in showing the IRS, banks, creditors, and others that the corporation is legitimate.
The Initial meeting of the board of directors should be carried out for the purpose of having the directors adopt bylaws, appoint corporate officers, select a corporate bank, authorize the issuance of shares of stock, set the corporation’s fiscal year, and adopt a corporate seal and official stock certificate.
Who Records The Meeting?
It should be noted that any action taken by the director should be prepared and recorded by any of the directors or incorporator in the corporate minutes.
Issuing stock to each shareholder is not legally required in most state states, paper stock certificates are usually issued by small corporations.
It Serves As Security
A corporation’s share of stock serves as security, classified under a state and federal securities law in regulating offers and sales of corporate stocks.
Keep A Record Of Shareholders
Make sure to issue stock to each shareholder by having each shareholder’s name and contact information placed in the stock transfer ledger of the corporation.
A corporation is subjected to additional regulatory and tax requirements that include the Federal Employer Identification Number (EIN) for filing business taxes and business licenses, depending on the location and type of business which you may be required to obtain both local and state licenses.
