When you incorporate your business, the corporation takes on a life of it's own, thus relieving you of the burden of having to put your assets at risk and gives you greater liability protection.
A corporation becomes something more than just a business, it takes on a persona almost like a real person, taking on debt, it's own liabilities, and it can make money and retain some of the profits.
The most compelling advantage to getting your business incorporated is that it keeps your personal responsibilities separate from your business responsibilities, therefore, giving you a greater degree of protection from being held personally liable in your business dealings.
Starting Your Corporation
When starting your corporation, hiring a good corporate attorney who know the ends and outs of corporate law may be a good idea.
Although hiring an attorney is not mandatory and you can complete the process yourself, it can be a humbling experience if you don't have some knowledge of the process.
And there is always the possibility that you may miss something in the law or not file the correct documents.
Forming A Corporation
Forming a corporation takes time and money, and it has to be done in accordance with strict rules and regulations based on state laws. It is more complex and more expensive than other forms of business structure.
You have to select a fictitious business name, making sure that no one else in the state has it. This is important because if another company is using the name you want and it is incorporated in the state, you will not be able to use the name.
Preparing the articles of incorporation is one of the first steps that you will have to go through. There are forms that are provided by the state and it is up to you or your attorney to make sure that it is done correctly.
The proper documentation has to be filed in the state in which the corporation is to be located and the guidelines are issued by that state's Secretary of State.
Your corporation will need bylaws describing how the corporation is to function, when stockholder meetings will be held, and the responsibilities of the directors, shareholders, and all other officers on the board.
If your corporation is a small company, you may be listed as the only shareholder and the only board member, the president, secretary, and the treasurer of the corporation.
In a corporation, annual profits are given to the shareholders in the form of dividends determined by the board of directors.
Subsequently, if you do business in other states, you will have to file for corporation status in those states as well and pay the necessary fees and taxes.
It is imperative that you follow the rules of incorporation because if you fail to do so, you can be held personally liable for any debt incurred by the corporation.
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