If you’re someone who has sorted through different types of business structures and taken a decision regarding company formation, you must be facing a long list of necessary and manageable tasks. Forming a business and registering your company in the United States of America can be a stressful and confusing process, unless you’re all-set and you’ve got a well-proven idea of what you need to do. Without saying much on the hassles and difficulties, let’s straightaway take a tour on the steps that you need to take to form a company, the things that you require considering while forming a company and the benefits of the same.
Christening your company – Giving it an appropriate name
It is needless to mention that the name of your company should abide by the state’s rules and in case you’re not aware of them, get in touch with the state’s office. Few guidelines which you may follow while registering your company are:
- The name can’t be similar to any other corporation on file with the office of corporation
- The name has to end with a designator like ‘Incorporated’ or ‘Corporation’ or ‘Limited’ or just an abbreviation of the aforementioned words
- The name can’t include words like Cooperative, Bank, National, Federal, Reserve or United States as these words suggest a relation with the federal government
The corporation office of the state can inform you about the ways in which you can find out whether or not the proposed name is available and not taken by any other organization.
Nominating trustworthy directors
Directors are the ones who make major financial agreements and policies for the company. For instance, directors appoint further corporate officers, accredit the issuance of stocks, set salaries for corporate officers and approve loans from the company and to the company. The shareholders of a company appoint directors before the business takes off. There are times when owners can appoint themselves as directors but that doesn’t necessitate the fact that directors have to be owners.
Articles of Incorporation need to be filed
Next, you need to prepare and file ‘articles of incorporation’ with the corporate filing office of your state. Majority of the states use the phrase ‘articles of incorporation’ to describe the basic document which is required for company formation but there are other states too which use the term ‘certificate of incorporation’ to mean the same. All states require a company to have at least one owner and for a single-owner company, the sole-owner will prepare, file the document and sign it himself.
Holding an introductory meeting with the Board of Directors
As the owners appoint directors, they should hold an initial introductory board meeting to make few important decisions. In this meeting, they usually set the financial year of the company, designate corporate offices, incorporate corporate bylaws, accredit stock issuance and adopt an official stock certificate form. If the company is an S-corporation, the directors also have to elect the status of the S-corporation.
Grabbing necessary permits and licenses
Now that you’re done with the most vital steps, you’re ready to take off. But hey, did you grab your permits and licenses which you will need for company formation or starting a business of your own? A business license which is also called a tax registration certificate is important to get. Besides, you would also need an employer identification number from the IRS, a zoning permit from the local board and state’s permit for sellers.
Forming a corporation – The little-known benefits
- Independent liabilities: A corporation is a disparate legal entity from its shareholders and owners. This means that during a situation when the company is either sued or is drowning in debts, the shareholders and owners can’t be held responsible for the debts.
- Tax perks: Based on the corporate structure under which you opt for company formation, you may choose to have pass-through taxation to your individual taxes and you can also avert double taxation.
- Investors: In case you’re trying to raise capital by selling off shares in your company, you will have to be incorporated. You would also require forming a corporation in case you plan to go public.
- Forever source of income: A corporation will remain a corporation even when the owner dies, leaves or sells off the company. This is more of a perpetual existence.
- Credibility: When you register your company with an LLC extension after the name of the company, it usually sounds more credible to the people outside. This will help you attract more customers, partners and garner attention from the communities when you choose a specific form of incorporation.
Things to consider before starting a business
When you decide to register your company and start off with it, there are few factors which you should consider. What are they?
- The right mindset: Without having the right mindset, it is almost a waste of all your company formation efforts. There are many who make an error of choosing a business based on what it does. You should always choose a business which you love to do and which, you think, would serve the purposes of the audience.
- Finances: Your current financial situation is a definite factor in determining the kind of business you can afford. Before registering your company, take a firm look at your finances so that you are sure about your financial strengths and weaknesses. You may even seek help of the SBA for business loans.
- Right set of skills: The key skill that you may need to successfully operate a business is people management skills. In case you have multiple locations to take care of, you need to have a comfortable control of the day-to-day operations of the business.
Therefore, if company formation is all that is there in your mind, consider the above mentioned steps and facts for registering your company and kick-starting your business operations. Once your business starts generating enough income, you can use the profits to invest in more inventories.