How to Incorporate Your Business
Here is the typical procedure for incorporating a business:
- Choose a name and make sure it's available. Check with your you secretary of state or other appropriate agency. Reserve the name if it's available. Have some other names ready just in case your primary name is not available.
- File Articles of Incorporation with the Secretary of State or Corporation Commission.
- File a Certificate of Disclosure (if required).
- Pay the state incorporation fee.
- Publish Articles of Incorporation in a publication of general circulation. Usually for about 3 consecutive issues in a newspaper of general circulation. The newspaper generally prepares an Affidavit of Publication and sends it to the incorporating agency in your state (for Arizona it's the Corporation Commission).
- Pay the newspaper's publication fee.
- Hold a "meeting" to elect directors. An actual meeting may not necessarily have to be held. Check with your state.
- Prepare and retain appropriate documentation. Get a corporate records book to keep corporate documents.
- Issue capital stock to investors in exchange for money or property.
Important! If audited or sued, an IRS agent or an attorney for a plaintiff may request to see certain corporate documents to determine whether you have been complying with state incorporation laws. If you have no such documentation (e.g., minutes of meetings, corporate resolutions, etc.) it could be asserted that a corporation does not actually exist and the business could lose its corporate status leaving stockholders open to personal liability.
Four Options for Incorporating a Business
Here are some of your options for incorporating a business - from cheapest to most expensive.
Do it yourself:
If you're a do-it-yourselfer like I am, you can buy an incorporation kit, do the paperwork, provide the paperwork to the state for approval and pay their fee, pay the cost for publicizing your Articles of Incorporation in a publication of general circulation for a few weeks, and you're done.
You can find incorporation software online and at some office supply stores. Buy a how-to-incorporate book at a bookstore that applies to your state. These books are pretty good. They provide the instructions, tear-out forms and even the stock certificates and corporate seal. I've used them myself.
Use an Online Incorporation Service:
Another good option is an online incorporation service. They are inexpensive and will walk you through the process.
Use a Document Preparation Service:
A document preparation service is a good choice for someone who doesn't want to go the do-it-yourself route and doesn't feel comfortable going online for this type of thing and would like face-to-face contact with someone who can answer your questions. These services are generally less expensive than an attorney.
Use an Attorney:
Finally, if you don't have the time to go through the steps of incorporation, or just don't feel comfortable doing it yourself or using a document preparation service or online service, or maybe your situation is sufficiently complex and you feel it would be wiser to use an attorney, then certainly go ahead and do so.
For Freelancers and independent Contractors
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Have an accounting or bookkeeping question? Email it to me.
- Return to the Tax Basics for Startups Table of Contents to find related links.