I have gotten several requests recently around this theme:
“I want to incorporate my business and would like to do it myself. What are the basics that I need to do?”
My response to these have been that SCORE does not give legal advice and we always suggest that you establish a relationship with a business attorney for your business and even if you do the incorporation for yourself, it is a good idea to at least have your attorney affirm your work. Find out the cost and don’t be afraid to compare.
Having said that, this is a process that you can complete for yourself with a little research. I always remind these potential CEOs that there are some basics to certainly include and will share work from Drake Forester who writes extensively about small business issues and specializes in translating complex legalese into language everyone can understand. His writing has been featured on Fox Small Business, AllBusiness.com, Score.org and many other websites and blogs. Although the details can differ from state to state, the basic outline of the incorporation process is the same.
Here are some basics:
1. Find a Name: The first step to incorporating your business is making sure your business’s name is available. Fortunately, all 50 states have online databases where you can find out if your proposed name is already in use. This search option can be found on your secretary of state’s website (or the website for the corresponding agency tasked with forming businesses in your state).
Once you’ve landed on the site, run searches until you find a name someone else hasn’t taken (hopefully, you don’t need to run more than one search).
2. Create Your Governing Documents: If you’re starting a corporation, the governing documents are called corporate bylaws. For LLCs, the documents are usually called LLC operating agreements.
Bylaws and operating agreements are typically not filed with the state. They are for internal use and serve as formal guidelines for how your company will handle disputes, ownership percentages, dissolution, losses, profits— everything.
If your company or corporation has two or more owners, these documents will be especially vital. Be sure to sit down with your fellow co-owners to get clear about what your organization’s bylaws or operating agreement contain.
3. File Your Paperwork: This is the step that will form your LLC or corporation with the state.
On almost all state websites, you will be able to download a PDF copy of the articles of incorporation (commonly called articles of organization if you’re forming an LLC), but you can also file online in most states. Either filing option will include step-by-step instructions for how to complete and submit the form.
The information required in the articles varies by state.
Typically, you’ll need to list basic information like your company’s name, mailing address, registered agent name and address, purpose, and the names and addresses of your corporation’s directors and/or officers or your LLC’s members and managers.
Even if you get confused while filling out the articles, do not leave any section blank. Instead, call the agency in charge of forming business entities in your state (usually the secretary of state’s office). They have paid staff who can answer whatever questions you have about filling out the form, so long as answering the question doesn’t constitute giving legal advice.
When the state has accepted your filing, it will send you a certificate or a receipt (depending on the state) that confirms your business’s legal existence.
4. Hold a Meeting: One of the main goals of your organization’s first official meeting is to document the funding of the LLC or corporation. You’ll need to record the names of the people who exchanged money, assets, or services for partial ownership as well as the percentage of the company each person owns.
This documentation typically appears on the operating agreement for LLCs and in the bylaws for corporations. LLC members can receive membership certificates, and corporations can issue stock certificates.
Wrap up the meeting by having everyone relevant sign the bylaws or operating agreement and any initial resolutions (such as a resolution to open a business bank account) necessary to get your business up and running.
5. Obtain an EIN: Most businesses need a federal employer identification number (EIN or FEIN). Fortunately, the process of obtaining an EIN is painless (and usually instant) if you apply for an EIN online at the IRS website.
The form is short, and the information required to complete it is fairly simple. If you know your social security number, what kind of business entity you formed, and your fiscal calendar year (which usually begins on Jan. 1 and ends Dec. 31), you should be fine.
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