Procedure of the Formation of a C Corporation

Introduction

C corporations are typically publicly listed businesses that are controlled by investors. They are taxed differently from other business structures. The most popular company structure in America is a C corporation. These corporate entities are taxed independently of the business owner(s). Owners are protected by C companies from being held personally liable for business debts or legal actions.

This article is intended for those who desire to launch a business but are unsure on how to set up their organization.

Name the Corporation

The name of the corporation must be distinguishable from the names of other corporations in the state, and it must be available for use in that state. The name should also not contain any prohibited words or phrases under either federal or state law (for example, “bank” or “insurance”). It’s also good practice to make sure that your company name won’t be easily confused with another company’s name that already exists.

For example, if you are going out on your own after working for a large corporation named Acme Corporation for many years, don’t call yourself Bob’s Incorporated; instead, try something like Bob’s Consulting Company instead. You want your business to stand out from others! Finally—and perhaps most importantly—you need a unique yet memorable name for your new business so people will remember who you are when they see ads or hear about what you do. In fact, having an easy-to-remember name can help build customer loyalty over time by making it easier for them to recall whether they’ve heard about/considered using services offered by companies like yours before deciding whether they should give them their business now instead of later.

Prepare and File Articles of Incorporation

Prepare and File Articles of Incorporation. To begin the process of forming a corporation, you must file articles of incorporation with the state in which you want your company to be located. The secretary of state’s office handles this task for you. If you are forming a C corporation, one page is sufficient. The articles should include the name, address and purpose of your business as well as any other information required by law (such as listing shareholders or directors).

Determine the Initial Board of Directors

In the early stages of a C corporation, you will need to determine the number of directors and the size of your board. The size of your board should be determined based on the type of business that you are operating; however, keeping it small is always recommended.

The term length for all directors is one year unless otherwise specified by law or by resolution at an annual meeting. You may also choose to stagger your director terms so they do not all expire at once, though this is not required in most states.

Finally, if there are multiple classes of stock being issued (such as preferred shares), then there must be separate classes represented on each side: one side holds common stock while another holds preferred shares. Only those who hold common stock can elect directors from both sides. Those who hold preferred shares cannot vote for their own nominees nor can their nominees run for election without being nominated by someone holding common stock first.

Notify State Officials of Organizational Meeting

When you’re ready to form your corporation, you need to give notice of the organizational meeting. This is a routine process that involves notifying state officials, the secretary of state and the Internal Revenue Service (IRS).

You notify the state officials by filing articles of incorporation with your Secretary of State. The filing fee may vary from one state to another but it will be less than $100 per entity.

You give notice to the IRS by filing Form SS-4 with them within two months after organizing your corporation. It has been reported that approximately 47% of all corporations did not do this in 2007 and as a result they were suspended on their first tax return because they failed to file a required information return or pay estimated taxes on time.

Issue Stock and Prepare Corporate Records

When you incorporate your business, the following steps will be taken:

• Issue stock. The first step is to issue stock to the shareholders. Corporations can have one class or multiple classes of shares, with each class having different rights and preferences. For example, common stockholders may receive dividends before preferred stockholders do; preferred stockholders may receive their dividends before common shareholders do; and so on.
• Prepare corporate records. A corporation must keep detailed records regarding its business transactions and management structure in order to comply with state laws and regulations as well as federal tax rules. These records include minutes from shareholder meetings, minutes from Board of Directors meetings (if applicable), resolutions adopted by shareholders or directors granting authority for certain actions like issuing bonds or hiring an outside consultant.

Get an EIN from the IRS

What is an EIN?

To start a corporation, you will need to acquire an Employer Identification Number (EIN) from the IRS. This number is used to identify your business and serves as the tax identification number for corporations, partnerships and associations. The application process takes less than five minutes and can be completed online in one session without having to reenter data later on.

The IRS has made it even easier to obtain an EIN by providing a tool that allows you to save time by entering your personal information once instead of multiple times when applying online using different forms. The US Small Business Administration also offers helpful guides on how to apply for an EIN if you run into trouble during the process. They provide sample questions with corresponding answers so that you can easily navigate through each step until completion.

Takeaway:

You’ve decided that a C corporation is right for your business, and are ready to form one. The good news is that the process of forming a corporation isn’t difficult—it just takes time. Once you’ve filed the paperwork with state authorities, it won’t take long before your business is officially incorporated and recognized by federal government agencies.

Incorporating in Delaware is popular due to its relatively low fees and streamlined incorporation process. However, other states may have more favorable laws regarding tax treatment or employment law if those factors are important to you.

Conclusion

Once you have your corporate documents and EIN, you can begin to use them. Your first step will be to prepare a Form 1120, U.S. Corporation Income Tax Return, which is the annual federal income tax return for the corporation. The IRS has a wide variety of forms and instructions that can help you complete this process. You will also need to send in 1099s for any employees or independent contractors who received more than $600 from your company during the year (such as if they provided services).