Incorporating for the Average Business Owners

On January 19, 2010, in articles of incorporation, C-Corporations, S-Corporations, by Entity Wiz

Forming a corporation is beneficial to average business owners in many ways. Creating a separate entity for your business helps you to keep track of your business growth and to project your business to the public. Incorporations are designed to do that – create a separate legal entity from that of the business owner.  All depends on where you stand on the average business owner scale. If you are on the lower half of the scale and your business is more of a hobby than a way of earning your bread, incorporations are not too appealing. Forming a corporation is relatively expensive and entails tedious formalities and procedures to maintain and operate.  A sole proprietorship or a partnership will suffice in conducting a hobby as a business if your business does not give rise to serious risks and potential liabilities.

Small business incorporations are necessary when your business has grown from a hobby to that of a serious business concern. As your business transactions rise in volume, your business risks increase proportionately. The main disadvantage of a sole proprietorship or partnership is that the business owner’s personal liability is unlimited for all business debts or obligations. Forming a corporation will protect the business owner from the unlimited liability issue. In a corporation, the business owner’s liability is limited to the stock held by that owner.

Forming a corporation is not too difficult but do involve serious formalities and procedures. Incorporations are done under the state laws. Each state has its corporation’s code, which governs the formation and operation of business as a corporation. You can form a corporation by filing an Articles of Incorporation with state agency dealing with incorporations. Generally incorporations are handled by the Secretary of State’s or Corporations Commissioner’s offices. The fees for filing Articles of Incorporation also vary from state to state. Some states stipulate that the corporation bylaws be filed along with the Articles and a public notice issued regarding the intention to form a corporation. The Articles should contain all relevant facts about the corporation such as the purpose for which it is formed, names and addresses of the promoters and incorporators, principle place of business, authorized capital etc. You will have to designate a person to act as your resident agent for handling all paper work with state agencies and other institutions. Most states actively encourage small business incorporations in their territory and have simplified the procedures and formalities for ease of operations. State websites carry a sample of Articles of Incorporation as is needed to file in that state.

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How to incorporate in Arizona

On November 29, 2009, in C-Corporations, S-Corporations, by Entity Wiz

Forming a C corp in Arizona is not very difficult; you can do it in as little as three steps. What most incorporations don’t realize is that while there are only three steps to the incorporation process, some of those steps require many details. For example, to form a C corp in Arizona you will need to file your articles of incorporation, publish them in a newspaper a specific number of times, and then submit an affidavit of publication to the Arizona Corporation Commission.

The process seems simple, but it gets complicated as you go further along because of the numerous tasks that need to be performed. In Arizona, you do not need to have an operating agreement for your corporation, but having one can help you prepare the articles of incorporation and the bylaws.

The first step for incorporating in the state of Arizona is filling out and filing your articles of incorporation. The first task that you face with filling out your articles of incorporation is selecting the name of your corporation. When choosing a name you want to choose something that will make your business stand out, but something that doesn’t sound like anybody else’s business name. When you have finally decided on a name that fits in with the requirements for the state of Arizona you will want to run a name search through the Arizona Corporation Commission Name Approval’s website.

The second task that you have is to prepare the articles of incorporation. Your articles of incorporation must include specific information including a name that satisfies the requirements of A.R.S. Section 10-401 and the number of shares your corporation is authorized to issue. You will also need to include a statement of the type of business your corporation is going to practice in the state, and the name and address of each person who is going to be serving as a director. Your articles of incorporation must also include the name and address of each incorporator, along with their signatures, and the name, address and signature of the corporation’s statutory agent. If the known place of business for your corporation is going to have a different address than your statutory agents, you will also need to include that information.

The third thing that you will need to do is select your corporation’s statutory agent. This agent must be an adult individual who lives in the state or Arizona or it can be a domestic corporation that was formed under Arizona corporate law. You can also use a foreign corporation that is authorized to do business in the state of Arizona or a limited liability company that is authorized to do business in Arizona, or was formed in Arizona. The reason you need a statutory agent is if you are ever served with legal papers they can be served on behalf of your corporation. Just keep in mind that the statutory agent cannot have a post office box, they must have a street address.

Once you are ready to file your articles of incorporation with the ACC you will need to prepare a cover sheet and a certificate of disclosure. When completing the certificate of disclosure depending on how you answer the questions you might be required to submit more information. Once this is done you can file the articles of incorporation with the ACC in person or through the mail, in either case you will need to pay a filing fee of $60.

Once your articles of incorporation have been reviewed, you will receive a rejection or approval in the mail. If your articles of incorporation failed, you can resubmit them and pay another filing fee after correcting the mistakes. If they were approved you will need to publish them in a newspaper for the county your corporation is registered in for three consecutive publications. After this is done your corporation is formed, but you still have to prepare the bylaws and adopt them at a Board of Directors meeting.

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How to incorporate in Maryland

On November 24, 2009, in C-Corporations, General Entity Advice, Operating Agreement, S-Corporations, by Entity Wiz

One of the good things about incorporations in Maryland is that both C corp and S corps are recognized by the state. This is good news for business owners who are looking to incorporate in Maryland, but still receive the tax benefits of an S corp. If you are thinking about forming a corporation in Maryland you want to keep in mind that while incorporations are not required to have an operating agreement on file with the State, it is still something that your corporation should have so that no disputes can arise later about how to run the corporation.

The first thing that you will need to do when forming a corporation in Maryland is to choose a name for your corporation. Like other states when naming your corporation you must include a word or phrase in the corporations name that identifies it as a corporation, but the name must also be different from any other registered business in the State of Maryland.

The next thing that you must do is choose a resident agent for your corporation. The resident agent must be either a person who is a resident of the State of Maryland or a registered corporation of Maryland. Every corporation in Maryland must have a resident agent so that they can receive official state correspondence, but also in case the corporation is ever served with a lawsuit. The resident agent must be included in the articles of incorporation.

After deciding on who your resident agent is, going to be you will need to begin filling out your articles of incorporation. In the articles of incorporation, you will need to include the name and address of each person who is responsible for incorporating the business, but you will also need to include a statement by each incorporator stating that they are at least 18 years old and are forming a corporation in Maryland. You will also need to include the corporation’s purpose or a statement stating that the corporation can engage in any lawful business activity. The name of all of the directors must also be included in the articles of incorporation, along with the number of directors that your corporation has.

Stock information must also be included in the articles of incorporation. You will need to include the total number of shares that your corporation is authorized to issue. You must also break down the stock by class and par value. Other stock information that you must include with the articles of incorporation are the aggregate par value of all the shares and any preferences, conversions, or other share rights. You can also include other information about the stock that you are issuing, such as transferability of stock, but that is not required by law.

Once you have filled out the articles of incorporation you will need to file them with the State of Maryland, and pay your filing fee. The next things you will need to work on are the Bylaws. You will need to create the bylaws for your corporation because that is what will govern your business and any business affairs. You will not have to file your bylaws with the state government, but you will have to have a meeting to adopt the bylaws.

After completing all of this the only thing, which you have left to do is the annual report, which must be filed with the Maryland State Department of Assessments and Taxation each year when you file the corporate business personal property return. You will also have to pay a filing fee to file this document each year.

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How to Start a Corporation or LLC

On November 9, 2009, in Limited Liabilities Companies (LLC), S-Corporations, by Entity Wiz

If you are thinking about forming a corporation, you might want to take a minute to weigh your options. Sometimes forming a corporation is not always the best choice for a business. To weigh your options you will want to look at the other options you have when starting a business, such as starting a LLC instead of a corporation.

Many people choose to form a LLC instead of a corporation because the LLC process is similar to the incorporation process. One of the benefits of starting an LLC instead of a corporation is that you will be able to receive the tax benefits of a partnership but the protection of a corporation.

Here are the steps you will need to take when starting a LLC.

Step one:
You are going to need to choose a name for your business. When choosing a business name you will need to comply with any rules that are set forth for choosing a LLC business name. Most states are going to require that you choose a unique business name. You will need to end the business name with an LLC designator, such as LLC or Limited Liability Company. There are also certain key words that cannot be included in the business name, such as corporation, bank, city, or insurance. If these words are included the business cannot be formed as an LLC, instead you must form a corporation.

Step two:
You will need to prepare and file the articles of organization or the certificate of formation, depending on what your state calls it. The articles of organization will need to include specific information on your LLC, such as the name and address of your LLC. Some states require you to include the names of all members of the LLC. You also need to list your registered agent for the LLC, which is usually one of the LLC members.

Step three:
Once you have prepared the articles of organization you will need to file them with the state’s LLC filing office. To file the papers you will need to pay a small filing fee. Most states charge $100 to file the articles of organization, but a few of them, like CA, charge an annual tax on top of the filing fee. CA currently charges an $800 annual tax on top of the $100 filing fee.

Step four:
Creating an LLC operating agreement is not required by law, nor does it have to be filed with the LLC filing office, but it is still something you need to prepare. You need to prepare a LLC operating agreement because the operating agreement defines the rules your LLC will follow. The LLC operating agreement goes into detail about the ownership arrangements, including how profits and losses will be split up among the members. The LLC operating agreement also dictates how the LLC will be managed.

Step five:
This step only needs to be taken in certain states because not all states require you to publish your intent to form a LLC. If your state requires you to publish, your intent to form a LLC you will need to publish the notice in a newspaper over a period of several weeks. Once you have published the intent to form a LLC you will need to file an affidavit of publication with your LLC filing office.

Step six:
The final step is to obtain the licenses and permits that you will need to have to operate your business. You cannot officially open your doors for business until you have completed this last step.

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