How To Incorporate Small Business Enterprises

2007-03-08 10:33:40

( Business )



Incorporating a small business offers several advantages. One of which is that your personal assets are protected from potential liabilities from creditors and lawsuits. Incorporating a small business also opens more doors for raising capital such as through stock offerings. If you are interested in doing so, here is a step by step guide on how to incorporate small business enterprises.

Incorporating: Will It Benefit You?

Determine first the actual benefits of incorporation for your business. Consult with your lawyer and accountant whether incorporating offers enough benefits to be worth the trouble and expense of doing it. Remember that incorporation can be expensive and effort intensive. You need to weigh your decision carefully before proceeding further.

Laying The Groundwork

After weighing the pros and cons and having decided that incorporation is the way to go, consider what type of incorporation you want. If you have a small business, an in-state incorporation is most suitable. However, if you have expansion plans in the near future, you can opt for out-of-state or even foreign incorporation. For business with multiple owners/founders, you need to come up with an initial arrangement on who will be sitting as members of the first board of directors and how shares of stock will be divided and at what price. This will prevent confusion and speed up your transition into a full-fledged corporation.

Filing The Articles Of Incorporation

Register the name of the company that you want to incorporate with your Secretary of State’s office. They are the ones tasked to give advice on how to incorporate small business entities as well as provide the forms needed. They will also inform you of the availability of your chosen name. The said office will likewise give you the forms needed to file the articles of incorporation, also known as the company charter. You will be asked to provide basic information about your company, such as the name, location, purpose of its formation and other identification details. Of course, you need to pay a registration fee which varies from state to state.

After The Registration

Your first order of business should be to conduct a stockholder’s meeting. Consult your lawyer for help if you are doing this the first time. In the meeting you will agree on corporate bylaws and formally elect the board of directors. You will also adopt specific rules and schedules for your annual stockholder’s meetings, the manner of voting and other procedures.

The decision to incorporate small business enterprises needs to be thought of carefully, as the costs and paperwork for the initial setup and preparation of incorporation are significant.


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