Forming a corporation is important if your startup or small business needs to attract investors. Corporations offer investor-friendly tax options and personal asset protection.
You can form a corporation yourself by following these steps:
- Name Your Corporation
- Choose a Registered Agent
- Choose Initial Directors and Share Structure
- File Formation Documents
- Get an EIN
Or, use a professional service:
Northwest ($29 + state fee)
Starting a Corporation Is Easy
We provide detailed instructions to start a corporation yourself in our How to Start a Corporation guides.
Select your state to get started:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- Washington
- Washington D.C.
- West Virginia
- Wisconsin
- Wyoming
Form a Corporation with Northwest’s Trusted Experts
Northwest offers comprehensive, budget-friendly corporation formation services designed to make the process as smooth as possible. Start your corporation today for just $29 + state fees.
Get StartedStep 1: Name Your Corporation
Choosing a business name is the first step in starting a corporation. You should choose a unique name that complies with your state’s corporate name requirements.
General Corporate Name Guidelines:
- Your name must contain the word “corporation,” “company,” “incorporated,” “limited” or an abbreviation of one of these terms.
- Your name must be distinguishable from any existing business in your state.
- Your name cannot use the words “bank,” “trust,” “trustee,” “credit union,” or related words without approval.
- Your name cannot include words that could confuse your corporation with a government agency (FBI, Treasury, State Department, etc.).
Is the URL available?
Before you register your corporation, you should make sure a good URL is available for your business name. Even if you aren’t planning on creating a business website now, we advise buying a web domain right away to prevent other small businesses from acquiring your domain name.
We recommend using GoDaddy to search for a web domain name.
Do I need a DBA (Doing Business As) or trade name for my business?
You will need to set up a DBA to operate under a name other than your legal name. Some states also require certain business types to file a DBA and some states don’t allow DBAs at all.
To learn more about DBA guidelines in your state, visit our How to File a DBA guide.
Step 2: Choose a Registered Agent
You must appoint a registered agent when you register your corporation.
A registered agent is an individual or entity that has been appointed by an LLC or corporation to receive service of process, government correspondence, and compliance documents on a business’s behalf. To learn more, read our What is a Registered Agent guide.
Your registered agent can be an individual, business entity, or professional registered agent service. Any member of the corporation or individual can serve as your registered agent as long as the person:
- is 18 years or older
- has a physical address in the state where business activity is conducted
- is available (in person) during normal business hours
Get a Year of Free Registered Agent Support
Northwest offers a free year of registered agent service with every corporation formation, giving you expert handling of compliance documents and added peace of mind.
Get StartedStep 3: Choose Initial Directors and Share Structure
You will need to select your initial director(s) and determine your share structure before you file your formation documents.
Initial Directors
In most states, you must appoint at least one director who will oversee your corporation until the first shareholder’s meeting.
A corporate director is in charge of the adoption, amendment, and repeal of operational bylaws as well as the election, supervision, and removal of officers.
After the corporation is formed, an organizational meeting should be called by the incorporators or by a director if one was named on the formation documents. During this initial meeting, the incorporators will name all of the initial directors.
An Incorporator Statement with complete names and addresses of each director, and meeting minutes, will be signed after the meeting and should be stored in your corporate records book.
Share Structure and Classes
A share of stock is the unit of ownership of a corporation. Each share of stock represents a percentage of ownership in the company. For example, if a corporation issues one share of stock, the shareholder (stock owner) would then own 100% of the corporation.
Shares can be structured into classes. Each class, termed a share class, holds different rights and privileges. You can have multiple classes and each class can hold any number of shares.
- Authorized Shares refers to the number of shares the corporation is allowed to issue
- Issued Shares refers to the total number of shares actually issued by the directors to shareholders
Step 4: File the Formation Documents
You will need to file formation documents with your state. Once the documents are approved, you will have officially formed a corporation. Most states provide fillable formation documents online.
The formation documents will cover the basics of your corporation, including:
- Corporate name and principal address
- Corporate service of process agent name and street address
- The number of authorized shares the corporation is allowed to issue
We recommend starting with a high number of authorized shares. Many attorneys and business professionals suggest 10 million. By starting with a high number, you have the flexibility to issue shares as needed without paying legal fees to increase your initial authorized shares amount.
Step 5: Get an EIN
The Employer Identification Number (EIN), or Federal Tax Identification Number, is used to identify a business entity. It is essentially a social security number for the company.
An EIN is required for the following:
- To open a business bank account for the company
- For Federal and State tax purposes
- To hire employees for the company
Where do I get an EIN? An EIN is obtained from the Internal Revenue Service (IRS) (free of charge) by the business owner after forming the company. This can be done online or by mail.
How to Run A Corporation
Create Your Corporation’s Bylaws
Corporate bylaws are the rules that determine how your organization will be governed and run. You can think about the bylaws as a constitution for your corporation. It makes the rules and priorities clear for everyone.
A corporation’s bylaws supplement any rules set forth by the federal government or the state.
In your bylaws, be sure to include:
- How the corporation will be governed, including the role of directors and officers
- How meetings are held, voting procedures, and how officers or directors are elected
- How records will be managed and kept
- How disputes will be handled
- How bylaws will be added/amended in the future
- The date of the annual board of directors meeting
Ready to get started? These bylaws templates can be customized to suit the needs of your incorporated business.
Get a Bank Account for Your Corporation
A business bank account helps separate personal expenses and company expenses, which is required to maintain your corporation’s corporate veil. A corporate veil protects your personal assets from creditors in potential lawsuits against your corporation.
We recommend checking out our review of the best business bank accounts to find the optimum financial solutions for your corporation.
Get Insurance for Your Corporation
The next step is to protect your corporation by getting business insurance. Depending on the type of corporation you’re operating, your insurance requirements and needs may vary.
So, what is business insurance exactly? Business insurance protects your corporation’s assets from losses that can happen naturally while doing business, such as property damage or lawsuits.
Protect Your Startup’s Future
Secure comprehensive insurance coverage tailored for your business with Next Insurance’s flexible plans.
Learn MoreSet up a Corporate Records Book
You can think of this as the hard-copy record book where all critical corporate documents are kept, like your formation documents, bylaws, meeting minutes, stock certificate ledger, stock transfer documents, etc.
We advise that you keep the corporate records book at your principal location. Corporate records book kits can be purchased online, or you can use a large generic binder to store your records.
Hold Periodic Board Meetings and Record Minutes
An annual shareholder meeting must be held once a year in most states. During this meeting, the shareholders elect the board of directors. The date for this meeting should be set forth in your corporate bylaws. Other board of director meetings should be held regularly and minutes should be recorded.
Meeting minutes are not legally required in some states but they are necessary. Well recorded minutes are valuable during disputes and court actions. Several companies offer corporate minutes templates. To learn more, read our review on the Best Corporate Meeting Minutes Templates.
Research Corporate Licenses and Permits
You must comply with federal, state, and local government regulations when operating your corporation. For example, restaurants likely need health permits, building permits, signage permits, etc.
The details of business licenses and permits vary from state to state. Make sure you read carefully. Don’t be surprised if there are short classes required as well.
Fees for business permits and licenses will vary depending on what sort of license you are seeking to obtain.
Obtain the correct licenses and permits for your corporation, or have a professional licensing service do it for you:
- Federal: Use the U.S. Small Business Administration (SBA) guide to federal business licenses and permits.
- State: Visit our How to Start a Corporation state guides for links to your state’s licensing requirements.
- Local: Contact your local county clerk and ask about local licenses and permits.
What Is a Corporation?
A corporation is an independent business entity legally separate from management including founders, owners, officers, and directors. It’s registered with the Secretary of State and has an independent tax identification number. In the eyes of the law, a corporation is a separate legal entity with “corporate personhood”.
Owners of corporations have what’s called Limited Liability, in most cases. Part of whether an individual corporate director can be liable for the acts of a corporation depends on the acts involved. For example, if a corporation is involved in shady business practices and engages in a lot of self-dealing, those individuals could be personally and criminally liable for intentional acts. These are usually reserved for situations in which individuals try to shield themselves from liability using the corporation as just a ruse. This is why it’s important a corporation is properly capitalized and observes corporate formalities.
A corporation will continue to exist despite new owners or new shareholders and deemed to have a legal existence until it’s formally dissolved. Changes in personnel, directors, and shareholders doesn’t usually affect a corporation’s legal status.
Types of Corporations
- C-Corporation: The most common form of a corporation, unlimited growth, unlimited shareholders, sells stock, better access to funding, double-taxation (but can deduct business expenses), no restriction on ownership, etc.
- S-Corporation: Typically for smaller platforms, 100 shareholder limit, pass-through taxation (no double-taxation, instead taxation passes through corp to owners who file individually), ownership restrictions – can’t be owned by a c-corp, another s-corp, an LLC/Partnership, or many trusts.
- B-Corporation: A B corp — also known as a public benefit corporation — is a type of for-profit corporation that also must have a goal to benefit the community and/or the environment.
Advantages of Forming a Corporation
Here are some of the main advantages of starting a corporation:
- Limited Liability Protection: This means owners and shareholders enjoy “limited” liability protection so they aren’t personally responsible for debts or being sued. The corporation is. However, this protection can be taken away very easily if there’s been unethical, illegal, or irresponsible behavior some of which are described above.
- Unlimited Capital Generation: Corporations can generate and issue stock, so their ability to raise capital is unlimited far beyond that of much smaller organizations and business entities.
- Corporate Taxation Benefits: Because corporations are a legal entity separate from their owners, they pay taxes separately. Owners only have to pay taxes on profits paid (salaries, bonuses, and dividends), then everything else is filed under the corporate income tax rate which is often going to be better than individual income tax rates.
- Attractive to Potential Employees/Investors: Because of their growth and income potential (stock options), as well as certain tax advantages, it’s typically going to be much easier for a corporation to attract talent and acquire investor funds. This, of course, depends on the nature and size of the corporation.
- Management: Corporations are known for more dependable structures thanks to the formalities of maintaining a board of directors, elected officers and committees, bylaws, articles, meeting minutes, etc.
Corporation Disadvantages
If we had to narrow down the field of disadvantages into three, this is how we’d wrap them up, but keep in mind these aren’t disadvantageous in all circumstances.
- Resource Demands: Unlike an LLC or partnership, corporations can cost a fair amount in terms of both man-hours and money. It takes time to go through the motions, assemble a board, set up bylaws, and everything else involved. When choosing to start a corporation, as with any business, you have to ask yourself whether this makes economic sense and whether your corporation will realistically be profitable this year, next year, five years from now and ten years from now.
- Double-Taxation: First when the company makes a profit, and again when dividends are paid to shareholders.
- Formalities & Paperwork: Corporations are highly regulated entities on all levels – federal, state, and sometimes locally – so that’s also a lot more paperwork, documents to be filed, forms, record keeping burdens, etc. If you’re not good at record keeping, then you need to find someone who is.
When Is the Right Time to Form a Corporation?
In an ideal world, no one should attempt to form a corporation in any state without first consulting with trained legal and accounting professionals.
There’s a smorgasbord of expenses and formalities to consider and small business owners can get in trouble quickly if they don’t have help or know what they’re doing. If all you’re trying to do is set up a separate business entity for limited liability protection, consider other less complex options like an LLC. That being said, here are some realistic situations in which forming a corporation might be a better idea.
- Your platform has reached a point where the issuance of stock options makes sense to attract the best talent in your industry and bring in much larger amounts of investment capital.
- The tax year has ended. It sounds unusual but some states, such as California, do have an alternative minimum tax for corporations. So, for example, if it’s November or December and you want to form a corporation, you might be better off waiting until the following tax year (just a few months away) to avoid paying the alternative minimum tax for that year. Consult with your accountant or lawyer on this issue. Your state’s tax website ought to give some guidance on this issue as well.
- Your company profits have reached a point where it makes financial sense to leverage corporate tax benefits.
- Forming a corporation provides you and your founding team with the ownership control you need. For example, to keep the company “in the family” as part of an estate plan, or to give shares to people without having to pay gift taxes (with the help of a good attorney of course).
- You intend on forming a non-profit corporation, which means you form the corporation first and then apply for 501(c)(3) tax-exempt status.
- You may be getting pressure from clients, family, friends, and your professional network to incorporate. Just be sure to think it through and really balance the positive and less positive impacts this decision may have on you, your business, and your relationships.
Corporation FAQ
Why form a corporation?
There are a number of good reasons to form a corporation.
Advantages of a corporation:
- limited liability protection
- unlimited capital generation
- corporate tax benefits
- a more formal management structure
- appeal to investors
To fully realize the benefits of incorporating, you will want to consider your company’s capital needs, profits, and management and ownership structure to make sure forming a corporation is the best business structure for you.
To learn more about what business structure is best for you, read our How to Choose a Business Structure guide.
What type of corporation should I form?
The best type of corporation for your business depends on many factors. Here are some different types of corporations.
- Regular C Corporation – Owned by stockholders, has a board of directors, holds an annual meeting
- Professional Corporation – Generally for corporations that require certain licensed individuals (e.g., doctors, attorneys, etc.)
- Non-Profit Corporation – Use profits to advance the company’s mission rather than distributing them to shareholders
- S Corporation – An S corp is a type of tax classification. Unlike a C corps, an S corp can pass through income to their shareholders for tax purposes. S corps are limited to 100 shareholders.
You should carefully consider your business structure, goals, and financial situation before selecting your corporate structure.
Corporation vs LLC: Which is better?
Deciding which is better, a corporation or an LLC, depends on your business’ specific situation. Your company’s size, structure, goals, and more will determine if it is better to form a corporation or form an LLC.
To learn more about what business structure is best for you, read our How to Choose a Business Structure guide.
Which is the best state to start a business in?
While several states have laws designed to make them more attractive for corporations, the best state to incorporate in is generally the one where you are located and do the majority of your business. Certain corporate tax benefits or other laws may look appealing, but you may end up complicating things and paying taxes and meeting compliance regulations in multiple states.
How much does it cost to incorporate?
The cost of incorporating (filing formation documents such as articles of incorporation, a certificate of formation, etc.) is between about $45 and $300, depending on your state. There may also be attorney’s fees and a registered agent fee, among others.
What forms do I need to start a corporation?
The forms you need to start a corporation depend on the state where you are incorporating, but they will at least include a formation document. The name of this document varies from state to state (e.g., articles of incorporation, certificate of formation, certificate of incorporation, etc.).
Some states may require additional documents, so it is best to check our one of our state-by-state guides.
Do corporations have yearly filings?
Many states require corporations to file an annual report and/or other annual corporation paperwork, but requirements can vary. It is best to check out one of our state-by-state guides.
How are corporations taxed?
Owners of C Corps pay taxes on profits paid (salaries, bonuses, and dividends), then everything else is filed under the corporate tax rate. Because of this, corporations are said to be “double taxed.” First when the company makes a profit, and again when dividends are paid to shareholders.
S Corps are taxed differently, with profits passing through to the owners’ individual tax return. For more information, check out our What Is an S Corporation page.
What is the corporate tax rate?
The U.S. federal corporate tax rate is 21%. Corporations might also have to pay additional state corporate taxes depending on the states they do business in.