Incorporation

Incorporation is the process of setting up a corporation. A corporation is a type of legal entity that is separate from its owners. The owners are called the shareholders because they own shares of stock in the corporation.

Corporations are often treated in law as though they are people. Like people, corporations can sue and be sued, own property, enter into contracts, and do almost anything else that a person can do. One of the few things a corporation cannot do is vote or hold a public office.

There are two main reasons for incorporating a business. The first reason is to make it easy to invest in the business. Entrepreneurs need capital to fund their goals. If a business incorporates, an investor can own a piece of the business. Incorporation also provides the investor with some level of confidence that their investment is protected by laws that every corporation must follow.

The second reason to incorporate a business is liability protection. A corporation does business in its own name. If the corporation is sued as a result of a corporate activity that goes awry, the officers, directors, and shareholders of the corporation are usually not held personally liable. Also, if the corporation fails, then the shareholders typically lose only the value of their shares. A shareholder's personal assets are usually safe from corporate creditors.

Corporations are set up at the state level and not through the federal government. To incorporate, you must register your corporation with the state of your choosing and file Articles of Incorporation with that state. Articles of Incorporation are sometimes called Articles of Organization, Certificates of Formation, or something else, depending on the state.

In some states, you will also need to file bylaws. The bylaws set out the details regarding how the business will be run and the relationship between the corporation and the shareholders. They normally contain mundane information, such as identifying the agent for service of process, stating when annual meetings will take place, specifying any limitations on the sale of shares of stock, listing the duties of the directors, and so on.

The short answer to this question is that it depends on the state. But things are changing all the time. In the past, to set up a corporation, you would have to appear at a government office to file your Articles of Incorporation or mail them in for filing.

Many states have now set up electronic filing systems. Some allow the filing of only basic documents while others allow a corporation to file many types of documents. In some states, you can incorporate in real time via the Internet. In other states, it can take a week or longer for the state to approve a filing.

Probably the best examples of change are California and Delaware, which until recently allowed filing only in person, by fax, or by mail. It would usually take up to three weeks for processing your Articles of Incorporation. Now, both states have limited e-filing which speeds things up. Even better systems exist, for example, in Wyoming (incorporation in real time) and in Texas (usually within one day).

The answer to this question depends on your situation. If you are running a small business in only one state, it might make sense to incorporate in that state. If you incorporated out of state, you might have to pay a fee to do business in your home state. It might be simpler and easier to incorporate at home.

If you are incorporating for the purpose of attracting outside investors, Delaware may be the best place to incorporate. Delaware has a long history of being the preeminent state for corporate law. Delaware even has a special court, called the Chancery Court, that decides business and corporate disputes. These factors are important to investors. Investors want to remove as much uncertainty as they can from their investment. Having a corporation that is incorporated in Delaware promotes investor confidence in a business.

If you want to pay as few taxes as possible, you have other options. Most states impose income taxes on both individuals and business entities, but two states, South Dakota and Wyoming, do not impose any corporate income taxes at all. If you are not sure which state is the best option for your business, you can check in with a Rocket Lawyer network attorney for affordable legal advice or consult with the incorporation experts on the Rocket Lawyer Business Services team to stay Confidently Legal™.

There must be a reason why so many companies incorporate in Delaware. More than 65% of Fortune 500 companies have incorporated there. Also, more than half of all publicly traded companies in the United States are incorporated in Delaware. To what does Delaware owe this large proportion of corporate investment?

The primary reason to incorporate in Delaware is the quality of its corporate law. Delaware's corporate law has developed for well over a century. The state legislature strives to keep Delaware corporate law updated and modern. Moreover, unlike any other state, Delaware has a special court devoted to settling business and corporate disputes in a more timely and less expensive manner than in other regular court proceedings. It is this level of expertise in corporate matters that gives investors the certainty and reliability they prefer.

There are two answers to this question. First, there are the out-of-pocket costs to incorporate and the ongoing costs after incorporation. Second, there are the costs associated with any help you might need to file for incorporation.

When you file your Articles of Incorporation, you must pay a fee to the state. These fees range widely depending upon the state. The lowest filing fee is for the state of Kentucky, at $40. The highest filing fee is for Texas, at $300. There are also annual costs in many states in addition to the initial filing fee. You can wind up paying a substantial amount of money each year to stay in business.

The price tag for getting help to incorporate can vary widely. If you live in a small town, the local lawyer might be able to incorporate you for a few hundred dollars plus the filing fee. In larger cities, big law firms will charge you thousands of dollars to set up a corporation. Clearly, you can save yourself time and money by using Rocket Lawyer Incorporation services. Rocket Lawyer members pay only the state filing fees and non-members pay only $99.99.

Articles of Incorporation are the initial document that you file with the state to create your corporation. Most states call these documents Articles of Incorporation, but others call them Articles of Organization, Certificates of Formation, or some other name. But whatever the states call the Articles of Incorporation, they all contain the same basic information.

Articles of Incorporation state the name and the address of the corporation. They also identify the agent for service of process. The agent is the person or firm that receives official notices on behalf of the corporation. An officer, director or shareholder can be a registered agent, but if an individual serves as an agent, the agent must take care to keep the state informed of any address changes. Finally, the Articles state what the corporate purpose is, which usually is recited as the carrying out of any business allowed by the laws of the state of incorporation.

Depending on the state, Articles of Incorporation might also name the initial directors or state the number of shares of stock the corporation is authorized to issue. If there is more than one class of stock, the Articles of Incorporation set out what they are. Sometimes, the Articles of Incorporation include preemptive rights. These rights ensure that if one shareholder buys more shares of stock from the corporation, other shareholders have the right to buy enough shares themselves so that the percentage of ownership in the corporation remains the same.

A Certificate of Incorporation is another name for the document that you file with the state when you organize your corporation. Certificates of Incorporation are usually called Articles of Incorporation, but some states have different names for them. For example, Delaware calls its organizational document a Certificate of Incorporation instead of Articles of Incorporation.

The term 'Certificate of Incorporation' is sometimes confused with a document called a 'Certificate of Good Standing.' The Certificate of Incorporation establishes that a state has approved the registration of a corporation in that state. The Certificate of Good Standing, however, states that as of the date it is issued, the corporation has paid its taxes, filed the required reports, and complied with any other requirements to continue to do business in a state.

Articles of Incorporation are public documents. They are usually available from the Secretary of State of the state in which you incorporated your business. Sometimes, states assign corporate duties to a different state entity. For example. Arizona has created a Corporation Commission to perform these duties. When a separate entity exists, that is where you would obtain the Articles of Incorporation. Of course, there will be a fee, which varies by state.

Many states have made copies of Articles of Incorporation available online. You can simply download them and save or print them. In other states, you must pay a fee and order a copy of the Articles of Incorporation. Also, if you want your Articles of Incorporation to be certified, there will be an additional fee for that.