How to start a corporation in 8 easy steps

A corporation is a business entity that separates your personal and business assets and offers other benefits like a business structure and the ability to transfer ownership relatively easily. Starting a corporation is done on the state level, and the type of documentation needed can vary. 

You will need to choose and register your business name, appoint directors, file articles of incorporation, appoint a registered agent and create corporate bylaws, among other steps. Use this guide to learn how to start your corporation. We will walk you through eight simple steps on how to get started.

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8 steps to starting a corporation

1. Register your business name

Selecting a name for your business is crucial, as you will need one that isn’t used by anyone else in your state. The secretary of state or other relevant state agency typically requires that your business name is distinguishable from others.

Some guidelines you may need to follow include:

• Excluding any words that may be related to a financial institution (like “bank”) or a government agency (like “state department”).
• Including an identifier in your name such as “Corporation,” “Limited” or equivalent abbreviations. 

Consider coming up with a shortlist of possible contenders, then head to the applicable secretary of state’s website to see if the name is already in use. 

2. Appoint directors

A board of directors represents the interest of the shareholders and guides the overall direction (or decisions) of the company. You will need to appoint a board when filing your incorporation papers — the number of people may vary by state. For instance, some may only need one, whereas other types of corporations require at least three. 

3. File articles of incorporation

The secretary of state will require you to file official documentation to form your corporation — typically called the articles of incorporation or articles of organization. Each state will have different requirements in terms of the fees and documents required. In general, you may be asked to provide the following:

• The name of your corporation.
• Names and contact information of your board of directors.
• Name and contact information of your registered agent.
• The purpose of your business.
• The main address of your business. 
• The correct fee when submitting your application.

Most Secretary of State websites will have requirements and fees outlined. Check with your state to see which form you need to file and how much you need to pay to file your articles of incorporation successfully. 

4. Appoint a registered agent

A registered agent is an individual or entity that acts on the corporation’s behalf. The registered agent’s responsibility is to be available to receive official documentation, such as ones from the state and communication about legal requests. 

When choosing a registered agent, consider whether this person is available to receive mail and pass crucial communications on to decision-makers in a timely manner. Corporations can also take advantage of registered agent services for an annual fee. 

5. Create corporate bylaws

Corporate bylaws are rules and regulations on how the corporation should operate. These can include shareholder and leadership responsibilities, as well as when to hold annual meetings. Many states require this documentation, though you may not need to file it with the state formally. Your business will need to keep this document safe within your company and update it as necessary. 

Your corporation may want to hold an initial board of directors’ meeting to discuss the drafting of any bylaws and agree to other items like authorizing issuing stock, appointing leaders to run the business and resolving other day-to-day rules. Since corporate bylaws are a crucial part of the business, it may be a good idea to seek the help of an experienced corporate attorney to help draft them. 

6. Issue stock to shareholders

Issuing stock is a process of giving ownership to the shareholders. How many shares they own equals their stake or percentage of ownership in the company. Your company’s articles of incorporation should state the maximum number of shares any shareholder can own. Depending on the size of your company, you may also need to follow regulations stipulated by the United States Securities and Exchange Commission (SEC). 

7. Get permits and licenses

Your state may require certain business licenses and permits. Which ones will depend on factors like the nature of our business and where you’re operating. For example, corporations in the tobacco or firearms industries will typically need to apply for additional licenses before being allowed to operate. 

Check with the secretary of state and local government for details on any additional licenses or permits you may need. You can also reach out to the relevant federal agency if you need to apply for a permit with them. 

8. Get an EIN

An EIN, or employer identification number, is a tax identification number assigned by the IRS used to file your business tax returns. The easiest way to apply for one is online through the IRS website. Check with your state as well, as your business may require a state number or charter for tax purposes as well. 

Once you have an EIN, you can use it to complete other business tasks like opening a business bank account and setting up withholding for employees. 

Pros and cons of a corporation

Pros

• Separation of personal and business assets: Owners or shareholders typically won’t have their personal assets put at risk or aren’t liable for any business debts or financial obligations. 
• Tax advantages: Corporations may have certain advantages, such as special business deductions.
• Ability to reinvest earnings: This type of business entity can take its earnings and retain them in the company by either paying down its debts or using it to invest in the company. 
• Succession and continuity: Since a corporation is owned by the shareholders, it can change ownership by the buying and selling of its stocks. The business can continue even if an owner or shareholder no longer wants to be part of the corporation. 

Cons

• Higher costs: Starting a corporation can come with higher costs, like additional permits and licenses and professionals to help draft corporate bylaws. There are also most likely higher costs to maintain the company compared to other types of business structures. 
• Additional paperwork: Administering a corporation tends to be more complex because of the additional paperwork and other accounting needs required to run the business smoothly. This is also amplified if a corporation has to follow SEC guidelines and regulations. 
• Potential complex tax implications: Since a corporation is a separate tax entity, businesses need to ensure they’re keeping their books accurately to help shareholders minimize double taxation. Meaning corporations are taxed both at the corporate and personal level. 

Types of corporations

	C-corp	S-corp	Nonprofit corporation
Purpose	The default structure assigned by the IRS for for-profit corporations	Business entity designed to pass on income, losses, credits and deductions to owners and shareholders. Businesses that want to avoid double taxation — taxed at both the corporate and personal level — tend to choose this structure	Exists to support a public cause (like charitable or educational) or the benefit of the public
Tax responsibilities	Pays corporate tax and state and federal level. Shareholders are subject to personal income taxes on dividends	Income taxes paid by shareholders and assessed at their individual income tax rates. The corporation may be responsible for paying taxes for certain types of passive income and built-in gains	May be exempt from certain tax obligations.Will need to meet IRS requirements to qualify

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Featured registered agent service offers

ZenBusiness

Learn More

Via ZenBusiness’ website

Cost

$199 annually

Same-day document delivery

No

Phone support

Yes

LegalZoom

Learn More

Via LegalZoom’s website

Cost

$199

Same-day document delivery

No

Phone support

Yes

Northwest Registered Agent

Learn More

Via Northwest Registered Agent’s website

Cost

$125

Same-day document delivery

Yes

Phone support

Yes

Frequently asked questions (FAQs)