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Should You Incorporate?
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Article 4: Incorporation: The Nuts And Bolts
As legal entities, formal corporations are owned by stockholders and posses certain characteristics, including the ability to own property in its own name, enter into contracts and sue or be sued. The stockholders elect a board of directors, which sets policies for the corporation and selects officers (such as a president, treasurer, secretary, etc.).
Strict legal formalities are associated with forming a corporation. These include:
The selection and reservation of a formal name The preparation and filing of articles of incorporation with the state The issuance of a Certificate of Incorporation (or Charter) by the state The payment of filing and publication fees to the state The drafting of formal bylaws governing the internal operations of the corporation Holding shareholders and board of directors meetings after incorporation
To maintain the benefit of limited personal liability, shareholders must make sure that corporate formalities are followed. These include:
No commingling of corporate and personal finances Holding an annual meeting Ensuring adequate capitalization
Once you’ve incorporated your business, you (as the shareholder) become an employee of the corporation.
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