When starting a new business, choosing the right structure is a consequential process, for both legal and financial reasons. One relatively popular option is to structure a new business as a corporation. This opportunity can offer significant advantages in terms of liability protection, potential tax benefits and the ability to raise capital.
With that said, this structure is not well-suited to every endeavor. For example, those who hope to operate a business on their own may want to opt for a sole proprietorship or limited liability company (LLC) structure. Weighing one’s options carefully, regardless of one’s circumstances, is generally wise.
The basics
A corporation is a legal entity separate from its owners, which results in limited liability for those owners. This means that the personal assets of the shareholders (the owners of the corporation) are protected from business liabilities and debts. Corporations can enter into contracts, own assets, sue and be sued independently of their owners as a result of this status as well.
To legally form a corporation, you must file articles of incorporation with the state’s Secretary of State office or a similar state agency in the state where you want to operate primarily. You’ll then need to craft corporate bylaws. This internal document should outline the corporation’s operational procedures, including the process for electing directors, the duties of officers and how meetings will be conducted.
Once the corporation is officially formed, you’ll need to appoint your board of directors and hold initial meetings to discuss and approve the bylaws, set up financial accounts and undertake any other necessary initial actions.
Structuring a business as a corporation involves careful planning and adherence to legal procedures. Seeking personalized legal guidance can help you to get started, regardless of the structure you ultimately choose for your new company.