Corporation is a legal structure that identifies a business as an entity separate from its owners. This distinction allows a corporation to pay taxes, open bank accounts, and receive government licenses. It can also provide liability protection for its shareholders and the ability to raise capital by selling shares. Different types of corporations exist, such as C, S, and B, each with their own functionalities and tax implications.
Incorporating a business requires meticulous planning and attention to detail. There are many forms that must be filed and fees to be paid, which vary by state. The process can be lengthy, but a lawyer or an accounting professional can help ensure that the proper steps are taken to establish a corporation.
After the Articles of Incorporation are drafted, they must be filed with the state in which the corporation will operate. The articles serve as the corporation’s official charter and provide details on its purpose, directors, officers, and shareholders. In most cases, the articles must include the corporation’s name (which must be unique) and its registered address, as well as the number of shares authorized to be issued and their par value.
Once the articles are filed, the corporation will receive an Employer Identification Number (EIN), which is required to open bank accounts and apply for business licenses. The EIN also identifies the corporation for federal tax purposes. The board of directors is responsible for overseeing the day-to-day operations of the corporation, and its members are appointed by the shareholders. The corporation may also create committees to help with specific functions, such as an Audit or Executive committee.