How to Start a Corporation in 10 Steps

Author: NCH Internal Editorial Team
Reviewed by Cort W. Christie, MBA
Cort W. Christie, MBA is the Founder of Nevada Corporate Headquarters (NCH) and a nationally recognized entrepreneur, executive, author, and speaker. Mr. Christie has spent over 32 years helping business owners structure, protect, and scale their companies.

This article has been reviewed by Mr. Christie to ensure accuracy and value for today’s entrepreneurs. Jump to...

Ever dreamt of turning your passion project into a successful venture? If so, incorporation might be the key.

Contrary to popular belief, you don't have to be an industry giant to start a corporation. You can easily establish one even if you're a small business owner, as long as you know where to start. We'll discuss how to start a corporation in 10 easy steps and answer some of the most frequently asked questions about corporations.

How to Start a Corporation

Although the incorporation process varies per state, the process typically includes the following steps:

1. Choose a Type of Corporation

Before you can start incorporating your business, you must consider the type of corporation you want to form. Depending on the goals and ownership structure you want to have, there are three major types of corporations you can choose from:

• C Corporation (C-Corp): When you incorporate your business, you'll automatically be considered a C corporation. This type of corporation is ideal for you if you want to open your business to the public and get more capital. The only caveat is that C-corps are typically subject to double taxation.
• S Corporations (S-Corp): S corporations are similar to C corporations, except they have a pass-through tax election. This means that the company does not pay any corporate income taxes. Instead, its shareholders must report and pay taxes on their share of the company's profits. This type of corporation is ideal for those who want to get more tax savings. However, you can only get this status if you meet IRS requirements for the S-corp tax election. (IRS Form 2553)
• B Corporations (B-Corp): Benefit corporations or B-corps allow businesses to pursue a philanthropic mission in addition to their for-profit goals. This type of corporation is only allowed in certain states, so we recommend you check with your Secretary of State first.

2. Pick Your Name

Once you know the type of corporation you want to form, you can start thinking of your business name. Your corporation's name should be unique. It should not be similar to any existing business name in your state.

Most state offices have a database you can use to check if the name you want to use is still available. In addition, your chosen name should include the following identifiers:

• Incorporated
• Limited corporation
• Company
• Inc.
• Co.
• Ltd.

If you want to operate under a name different from your chosen corporate name, you must register a fictitious or Doing Business As (DBA) name.

The process for registering a DBA name varies depending on where you are, so we recommend you check with your Secretary of State for the right procedure.

3. Appoint Your Initial Directors

Before incorporating your business, you must appoint a board of directors to oversee your corporation's operations.

Most states have different requirements for the number of directors a corporation's board should have. Some only require one board member, while others need a minimum of three.

It's worth noting that your board of directors can be replaced. Once your corporation has officially been formed, you can elect new members.

4. Hire A Registered Agent

A registered agent is a person or a company who receives legal correspondence on behalf of your corporation. All states require incorporating businesses to have a registered agent who lives within the state.

5. File Your Articles of Incorporation

Now that you have your initial board of directors, you can fill out your incorporation articles and file them with your Secretary of State's office.

These documents have different terminologies, requirements, and filing fees in each state. But they typically include the following information:

• Name and address of the corporation.
• Purpose of the corporation.
• Name and address of the registered agent.
• Name and address of the initial board members.
• Types and number of shares of stock certificates to be issued.

6. Draft Corporate Bylaws

Corporate bylaws are the rules and regulations that govern your corporation. You can draft bylaws before or after you've submitted your formation documents to the Secretary of State.

Bylaws are typically drafted depending on the needs and goals of a corporation. However, they must include provisions for the following:

• Names and titles of officers.
• Roles and responsibilities of each officer.
• Procedures for decision-making.
• Procedures for annual shareholders meetings.
• Procedures for voting.
• Procedures for issuing stock.
• Board of directors
• Amendments
• Dissolution

There are plenty of ways you can start drafting your corporate bylaws. For instance, you can look for a template online and modify it to your liking or work with a corporate lawyer to write new bylaws.

7. Hold Your First Board Meeting

Now that your corporation has been officially formed, you must hold your first meeting with your entire board of directors. This way, you and the rest of your board will be on the same page when you start your operations.

When you hold your first board meeting, make sure you discuss the following matters:

• Approval of the drafted bylaws.
• Appointment of a permanent board of directors & officers.
• Authorization to issue stock.

Record the minutes of your meetings and include them in your corporation's records. This is one crucial corporate formality your company must meet to maintain its status.

8. Write a Shareholder's Agreement

A shareholder's agreement is a contract between the shareholders of a corporation. This agreement determines how the corporation's ownership will be managed if a shareholder dies, retires, or leaves the company.

Drafting a shareholder's agreement during the early stages of your business will help you secure continuity and avoid conflicts in the future.

9. Issue Stock

For your corporation to raise capital, it must issue and distribute stock to investors. Once your board of directors has authorized the issuing stock, you can start giving it to your investors.

But before you issue any stock, make sure you note the following information:

• Who purchased the shares?
• How many shares were bought?
• How much did the shares cost?
• When did they purchase the shares?

10. Get Your EIN (Tax ID)

The IRS uses an Employer Identification Number (EIN) to identify businesses for tax purposes. But aside from this, your corporation will need an EIN to open its own bank account, hire employees, and set up payroll. You can easily get your EIN for no charge on the IRS website.

Ultimately, the process for starting a corporation is straightforward. But if you want a more detailed look at how your state's incorporation process works, we suggest you call your Secretary of State's office.

Frequently Asked Questions About Corporations

Here, we'll answer some commonly asked questions about corporations and how they operate.

01

What are corporate formalities?

Corporate formalities refer to the legal requirements your corporation must follow to maintain its status. One example we've given earlier is keeping accurate minutes of your meetings. If these corporate formalities are not upheld, your corporation could face hefty fines and even dissolution.

02

Can I switch from a C corporation to an S corporation?

Generally, corporations can change their designations if most of their shareholders approve. But as mentioned earlier, the IRS only grants S-corp status to those who pass its requirements.

03

Can one person establish a corporation?

Yes, corporations can have one shareholder. You can establish a single-person corporation in which you can be your company's shareholder, director, and officer. The incorporation process and corporate formalities will stay the same.

You’ll have to follow the same rules as traditional corporations to maintain good standing with your state.

04

Do states require corporations to file their bylaws?

Although most states require corporations to have bylaws, they're not required to file them with the state. Bylaws are designed to function as internal documents. There's no need for them to be part of the public record.

05

Can you transfer ownership of stock in a corporation?

In most cases, you can transfer ownership of stock in a corporation. Most companies have a provision in their bylaws indicating how ownership of shares can be transferred.

These provisions typically outline any restrictions or procedures shareholders must follow when transferring their shares to another party. For instance, the right of first refusal grants existing shareholders the first chance to buy the stock before it can be offered elsewhere.

06

Do I need a business plan to form a corporation?

No, you don't need a business plan to form a corporation, although having one is a good idea. A comprehensive business plan will serve as your roadmap to success.

It will help you outline your objectives, determine the steps needed to achieve them and identify any potential challenges you may face along the way.

Moreover, a good business plan can help you attract investors. A detailed plan shows investors that you have thoroughly researched your business idea and know how to execute it properly.

Start Your Corporation Today

Starting a corporation may seem a little complicated, but the rewards you'll reap from this experience will be well worth your hard work.

Corporations are the perfect entity for aiming for long-term, sustainable success. Their advantages can significantly enhance your venture's potential for growth.

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.

Book Your FREE
1:1 Business Checkup

In only 15-30 minutes, our business formation experts will meet with you and:

• Evaluate your current business structure and identify areas of improvement
• Find potential problems before they become major issues
• Develop a game plan for improving asset protection and minimizing tax liability
• Reduce your exposure in the event of a business accident

Time slots are limited and fill quickly, so secure your spot now!

---

Speak With a Business Expert

Please fill out the necessary information:

Select a Time (PST)* 9:00 AM (PST) 10:00 AM (PST) 11:00 AM (PST) 12:00 PM (PST) 1:00 PM (PST) 2:00 PM (PST) 3:00 PM (PST) 4:00 PM (PST)

Please fill in the required fields!

By submitting this form, you agree to the Terms and Conditions and Privacy Policy, and that my contact information, including email address, may be shared with the sponsor.

Schedule Consultation