When you start a business, you have a few options as to the structure that will work best for your circumstances and goals. A corporation is one. This business structure offers limited liability for owners and their shareholders. When it comes to large companies, corporations are often the preferred business structure, and for good reason. Investors, too, will usually back corporations. For example, it is easy to transfer corporate shares between shareholders and corporations have conventional legal precedents.
If you are considering forming a corporation, then consulting with an attorney can be advantageous. An attorney can help you get the process started and ensure that everything is done correctly. In California, the Los Angeles business startup lawyer at Leiva Law Firm can assist you.
What to Know About Starting A Corporation
There are essentially three different types of corporations that you may choose from. These are:
C-Corp
When forming a corporation unless you indicate otherwise, your business will be a C-corp structure. This type of traditional corporation is best for those who are looking for venture capital investors or who want to go public. A C-corp will pay corporate income tax.
S-Corp
To form an S-corp there are certain criteria that must be met. However, there could be a tax advantage to this structure because an S-corp does not pay corporate income tax. Shareholders will only pay personal income taxes on the amount of the company’s profit they receive.
B-Corp
A benefit corporation, or a B-corp, combines profits with achieving a particular social mission. In this structure, there are going to be many nuanced reporting requirements because of the social mission aspect of a B-corp formation. While the goal is still to make a profit, a B-corp must also be achieving its objectives with respect to the specific social mission it has been dedicated to advance.
The steps that are generally involved in starting a corporation include:
- Choosing your business name. A corporation’s business name must also include identifiers such as “corporation”, “limited”, “company”, and “incorporated.”
- Appoint a board of directors. Who you initially appoint can be changed down the road.
- File articles of incorporation.
- Draft your company’s corporate bylaws which will dictate how your company will be run and operate.
- After your corporation has been formed, once your board of directors has been placed, and when your bylaws have been written it is important to hold a board of directors meeting. Remember to keep minutes at this meeting and all others.
- Issue stock to your shareholders and keep a record of how much each shareholder has and what they paid.
- To ensure management and processes are established for shareholders, draft a shareholder’s agreement.
- Before you open a bank account, you must apply for an employer identification number (EIN) from the IRS.
- Depending on the industry you are in, you will likely need a permit or license to lawfully operate. Make sure that you have researched which permits, licenses, or DBAs will be required for your business.
Speak with an Attorney at Leiva Law Firm
Starting a business and forming a corporation are big tasks that you don’t have to do alone. Call the Leiva Law Firm today to schedule a free consultation at (818) 519-4465.
