How to form a C-corporation for Household

Introduction

If you own a household business, you may be considering whether to form it as a sole proprietorship or a corporation. Filing as a corporation can offer some significant benefits, but it also comes with more paperwork and is more expensive. To help you decide which type of entity is right for your family business, we’ve created this guide on how to form a C-corporation.

Determine if a C-corporation is right for your household

As a shareholder, you are not personally liable for the corporation’s debts. In other words, if your corporation is sued or finds itself unable to pay its bills, you will not be held responsible for its debts. This can be an important benefit because it means that the corporation and its shareholders are treated as separate entities—a C-corporation has a life of its own.

The downside to being a C-corporation is that it is taxed as a separate entity from its shareholders. A profit made by the business must be reported on each shareholder’s income taxes; losses must also be reported separately on each shareholder’s return.

Create an original name for your corporation

• Choose a name for your corporation that is not confusingly similar to another corporation’s name.
• Choose a name that is not too long or too short. The Secretary of State will reject your application if the name is too long, as it may be difficult to find on business cards and letterheads. If the Secretary of State rejects your application due to its length, they will allow you two weeks to amend it before they issue you an official rejection notice.
• Choose a name that does not suggest that your organization is a nonprofit organization or government agency.

File paperwork with the state

Once you’ve established your business, you’ll need to file paperwork with the state. The steps below will help guide you through this process.

• FILE A CERTIFICATE OF INCORPORATION WITH THE STATE

Once your LLC is in good standing and has filed all necessary documents, including an operating agreement and operating minutes, it can be converted into a C-corporation. To do so:

• FILE BUSINESS LICENSE AND TAXES WITH YOUR LOCAL GOVERNMENT AGENCY

It’s important that every household corporation pay its taxes and follow local laws when it comes to what businesses are allowed within their jurisdiction.

Create corporate bylaws

The bylaws are the rules that govern how your corporation will be run. They set out the duties of officers and directors, who has voting rights on important matters, when meetings will take place, and what to do if someone leaves or dies.

The board of directors is responsible for adopting these rules. These folks will also be responsible for making sure that all other business is carried out according to their legal obligations as determined by state laws or federal regulations.

Bylaws are filed with the state and are public record so they can be accessed online by anyone who wants them—which means anyone can see how you’re running your business! If you’re planning on selling shares in your company or going public with a stock offering, it’s important not only that you follow these guidelines but also that they reflect well upon you as an owner/operator.

Issue stock to shareholders

Stock is a part of the company that gives the shareholder rights and ownership in the company.

The number of shares issued will determine how much money you have to raise, as well as how many owners you’ll need for your corporation. For example, if you own 100% of a C-corporation with one million dollars in assets and liabilities, then each share would be worth $1 million due to what’s known as par value.

Hold a shareholder’s meeting

A shareholders meeting is where you will formally elect the board of directors and approve the bylaws. The board of directors hires officers, such as a CEO, CFO, and secretary.

File for an employer identification number with the IRS, to use on your taxes

You can find the EIN on your business bank account. You’ll need it to file your taxes, so don’t wait until the last minute to ask for one. Contact the IRS and ask them to assign you an EIN number. This nine-digit number identifies your business, but it also works as a tax ID number when filing with the IRS, which means that every single member of your household needs one!

Conclusion

When deciding whether to form a C-corporation for your household, it’s important to consider all the pros and cons. A corporation will give you limited liability protection from lawsuits, which can be helpful if you have a business that involves public exposure or risk. However, corporations have more complicated tax rules than sole proprietorships do, so they may not be worth it unless there are other reasons why filing as one makes sense for your household.