How are C Corporation Companies Formed?

Introduction

A C corporation is a type of business entity created by filing articles with the state and obtaining an employer identification number (EIN) from the IRS. After this, you have to file for any local permits required for your business to operate in your location. You will also adopt corporate bylaws at this time to govern how your company operates internally and address issues such as voting procedures and duties of directors and officers of the corporation (such as electing board members).

1. Filing Articles of Incorporation

The first step in forming a C corporation is to file articles of incorporation with the state in which you will operate. If your business is not physically located in any particular state, but has employees or customers there, you can form an “in-state” corporation. The secret to being considered an in-state corporation is having a place of business and conducting operations there (even if it’s just a post office box).

You must also file articles of incorporation with the secretary of state’s office (usually called Secretary of State.) The Secretary of State website has all their forms available for download by going here: [https://www.sos.ca.gov/business/forms/]. Articles typically include information about your company name, address and type (corporation), along with its authorized initial capitalization amount ($25K-$100K) and other details such as whether or not shareholders have voting rights.

2. Application for a Federal Employer Identification Number

File an application for a federal employer identification number (EIN) with the IRS.

To apply for an EIN, you can either complete the online form or use Form SS-4 to send in by mail. Either way, you’ll need to have copies of your articles of incorporation or business license on hand when applying.

The IRS provides a step-by-step guide on how to apply for an EIN here

3. File for Any Local and State Tax

Depending on the type of business you’re starting, you may need to register for sales tax permits or licenses with your state and local government. You’ll also need to apply for a federal employer identification number (EIN) and file a separate payroll tax return.

4. Obtain any other Permits, Licenses, or Registrations

The fourth step to forming a C corporation is to obtain any other permits, licenses, or registrations required to conduct business in your location. In some areas, this includes registration with the state. It may also require you to register for a federal tax ID number. If your city or county has any additional permits that are required (for example, if they require a business license), you should obtain those as well.

As part of this process, make sure that you are familiar with all of the laws related to business formation in your area so that you can easily speed through the process of obtaining these necessary documents when needed.

5. Adopt Corporate Bylaws

You will also need to adopt corporate bylaws to govern how your company operates internally and addresses issues such as voting procedures and duties of directors and officers of the corporation. The directors adopt the bylaws at their first meeting. You may choose to have them filed with your state office, but this is not required for incorporation.

For example, if you only want one director to represent your corporation in dealings with third parties (such as when you sign contracts), then you can specify that in your bylaws. Or if all directors are required to vote on certain issues (such as hiring or firing employees), then that’s something else that would be included in your bylaws.

6. Hold an Initial Meeting of your Board of Directors

The board of directors is the highest authority in a corporation. It is responsible for making decisions on behalf of the corporation and must perform its duties in compliance with relevant laws. The board should be made up of people who have a stake in the company (shareholders).

The board can be comprised of one person or several people, but they must include:

• A president who acts as chairperson.
• Vice presidents.
• Secretaries.

7. Issue Stock Certificates to Shareholders

You can issue stock certificates to shareholders electronically, but you do not have to print them out unless you wish. They can be held electronically or in a paper format. If your company is going to be doing business as an entity that needs to be recognized by the federal government as a corporation then it is recommended that you go ahead and register with the state and federal governments.

Conclusion

C corporations are one of the most common types of companies in the world. They allow businesses to raise capital and grow larger than they could as sole proprietorships or LLCs. If you’re thinking about starting your own business, it might be time to consider forming a C corporation.