Process of Incorporation
- The corporation is just one of several forms a business can take. Incorporating businesses is the job of individual states. The details of the incorporation process depend on state laws, and therefore vary. A company can incorporate in any state whose requirements it can meet, which may not necessarily be where it does most of its business. Some states, like Delaware, are famous for their pro-corporate legal environment, but most small businesses choose to incorporate locally to avoid the extra costs and complications of foreign incorporation. A major consideration when deciding where to incorporate is state taxes.
- The two essential elements of incorporation are a name and an incorporating document. The website of the Secretary of State maintains a list of registered names that entrepreneurs can use to search for availability. A corporate name must include a word or its abbreviation, like Incorporated (Inc.) or Corporation (Corp.), that signifies a legally incorporated business entity. The incorporating document, usually called the Articles of Incorporation or Charter, lists basic information about the company including its name, a description of its business purposes, physical address, registered agent and shareholders. The Articles of Incorporation must be filed with the state.
- Some states also require the filing of corporate bylaws. These are a set of internal rules that describe how the company will govern itself. Important information includes timing of shareholder meetings, structure of corporate governance, dissolution and other contingencies. Though they are not strictly part of the incorporation process, most new companies need to apply for a federal (and possibly state) tax identification number, and state or local business permits. Incorporation kits often contain other documents like stock certificates, a template for keeping minutes and notices of shareholder meetings.