December 7, 2009

Tips on Starting a Corporation


Hostway Team

By Winmark Business Solutions

One of the best-known and most widely used business entity forms is the corporation. The main advantage of a corporation is the liability protection it provides the owners or shareholders of the business. Liability is limited because the corporation is a legal entity that is separate from its shareholder owners. Forming a corporation is more complicated and more expensive than forming a sole proprietorship or a simple partnership. However, the formation process is not that difficult.

Here are a few tips to think about when starting your corporation:

  • Articles of incorporation must be filed with the Secretary of State's office in the state in which the corporation is being organized.
  • Corporations must register as "foreign" corporations in any states they do business that are outside of the state in which they were organized.
  • Outline corporate formalities — issuing stock certificates to the shareholders, holding annual meetings, recording the minutes of the meetings in the corporate register, and electing directors or ratifying the status of existing directors are all important functions to outline and record.
  • Elect the directors and appoint the corporate officers.
  • Review the tax laws governing your area — tax laws are complex and should be discussed with your accountant or your business attorney.

If your corporation is a nonprofit, there are two extra steps you must take:

  • File nonprofit articles of incorporation with the proper state agency — be sure to include the required clauses to ensure your nonprofit will qualify for tax-exempt status.
  • Apply for tax-exempt status with the IRS, completing Form 1023.
  • About the Author

    Winmark Business Solutions (WBS) is a free Web site for small businesses and entrepreneurs containing over 6,000 pages of business-critical information and downloadable tools at WBS is a division of Winmark Corporation, a multi-brand franchisor with nearly 900 franchise locations in North America. With over 25 years working with small businesses, WBS draws upon years of experience to bring important small business articles, information, tools, forms, checklists, calculators and downloadable forms to the small business owner to help their business grow. WBS contains over 6000 pages of business-critical information all available at

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