I want to start a Corporation INC.

I Want To Start A Corporation INC.

What is an incorporated entity or an “Inc.” and should you have one?

A corporation or business ending with “Inc.” has advantages for a business and its owners. Primarily, an incorporated entity protects an owner’s personal assets from liabilities accumulated by the company. A corporation is also the owner of all its assets, rather than the assets being owned by an individual. A corporate entity also eases the transfer of ownership to another party. According to law, an incorporated entity is much like creating a fictional person – it is a separate legal entity with its own rights and responsibilities.

While a corporation insulates an owner from personal liability in most cases, corporations are the most complicated and are highly regulated by state and federal rules and regulations.

The benefit of forming a corporate entity from which to run your business is the entity offers personal liability protection to shareholders. With some exceptions, owners are liable up to the amount they invest in the company, and their personal assets are not subject to losses, except in cases when owners have signed personal guaranties or otherwise pledged personal assets. Generally, sole proprietorships and general partnerships do not offer the same protection and do not insulate the owners from potential liability in the case of a lawsuit.

Creating and operating a formal business entity also makes your business appear more appealing to potential investors, customers or clients, employees, vendors, and lenders.

Corporations live in perpetuity, until they are dissolved. If an owner passes away or decides to divest their share of the entity, the business will continue to exist and operate. Ownership of a corporation is transferable according to the terms of the operating or shareholder agreement. There are some restrictions in place for certain types of corporations, but generally, shareholders can sell or pass shares to another person or business.

Creating a corporate entity can have tax advantage, but also potential tax consequences. Corporations are often described as having the disadvantage of “double taxation.” The tax advantages and tax consequences should be discussed with the owner’s financial advisor or accountant.

Every state has its own unique pricing structure for registering corporations. In addition to filing fees, entities have county or administrative fees.

Administrative Duties

There is a lot of paperwork involved in operating a corporation. Again, this varies from state to state, but you may need to do things like file annual reports or other similar documents to remain compliant.

Certificate of Incorporation

Corporate bylaws
Certificate of good standing if operating in another state

Corporate Minutes

If there are only a couple of owners involved in your small business — such as yourself and one or two others — then the administrative upkeep may not be worth it, and you may be better off selecting another business structure.

Corporation Services

General Business Corporations

General Business Corporations is an entity with one or more persons and granted a charter as legal recognition of a separate entity. The independent entity has its own rights, privileges, and liabilities from the shareholders.

Farm Corporations

Farm Corporations are similar to a General Business Corporation but have a limit of fifteen shareholders, and all shareholders must have a degree of kinship and follow the rules under NDCC, Section 10-06.1-01.

Professional Corporations

Professional Corporations are similar to a General Business Corporation but must consist exclusively of licensed professionals.

Cooperative Associations

Cooperative Associations is incorporated by five or more adults and one must be a North Dakota resident. The members share equally in control of the cooperative, meet regularly, elect directors among themselves, and operate under NDCC, Chapter 10-15.

Non-profit Organizations

Non-profit organizations consist of a group organized for profit, offering social benefit and providing goods or services.

Reserved Name

Reserved name is filed with the Secretary of State and held for no more than 120 days. A trade name or Fictitious name is a registered name for a business operating under a different name, such as “doing business as” or “DBA.” A business may choose to conduct business under another name and register a trade name.

Trademark or Servicemark

Trademark or Servicemark is colors, words, symbols, and/or designs used by a person or business for goods or services. The trademark or servicemark is available for a 10-year period after acceptance by North Dakota.

Contractor License

Contractor License is a person engaged in construction, repair, alteration, dismantling, or demolition of any structure with a cost or value exceeding $4,000.00 in North Dakota under NDCC Chapter 43-07.

How To Start A Corporation

Select a Corporate Name

While it may seem like a minor detail, choosing the right name for your corporation is a crucial step. The name of your corporation must not match or be similar to that of an existing corporation. Check with your local secretary of state’s office to see the availability of your proposed name.

Additionally, if you want to conduct business under your corporation’s name, check with the U.S. Patent and Trademark Office (USPTO) to make sure the trademark or service mark is available. You might consider talking to an attorney or receiving legal advice for help with the trademarking process.

You should also check to see if the domain name associated with your chosen business name is available. Perform a search of local directories to see if any local businesses are currently operating with the same or with a similar name.

Draft and file your articles of incorporation

To receive state correspondence and legal notices, you are required to have a registered agent. Lexline’s registered agent service will walk you through this process. Having a registered agent also ensures you receive paperwork appropriately in the event your company is involved in litigation.

Renewal of annual report. Each year, business entities need to file their annual report with their state’s respective Secretary of State’s office. At Lexline, you don’t have to think about it, we take care of it for you. Lexline will also renew your annual report to avoid a lapse in registration and we take the headache away so that you can focus on your core values and business.

Create corporate bylaws

Not all states require corporations to draft corporate bylaws, but you should consider developing them either way. Bylaws are some of the most important documents for a corporation because they set forth the rights and duties of the shareholders, directors, and officers, as well as outline how the corporation will operate.

Check with your local secretary of state’s office to see if corporate bylaws are required in the state in which you plan to incorporate your business.

Draft a shareholders’ agreement

If desired, be sure to prepare and execute a shareholders’ agreement. A shareholders’ agreement is often utilized by small, “closed” corporations that want to restrict who can become a new shareholder and set provisions for how existing shareholders can exit the corporation and sell their shares, among other requirements.

Maintain corporate minutes

Corporate minutes document the meetings of shareholders and the board of directors. They allow the corporation to formalize its appointment of board members, officers, and other relevant resolutions, such as the decision to obtain a federal ID number, open a corporate bank account, choose a tax status, and many other tasks described therein. Minutes must be used to record actions during all board and shareholder meetings.

Issue shares of stock

Prepare and execute stock certificates, and update the corporation’s share ledger. The share ledger keeps track of who owns shares and how many they own. Corporations are required to keep track of how many shares they issued, who owns them, and how many are outstanding.

Obtain an Employer Identification Number

The Employer Identification Number (EIN) is basically the corporation’s Social Security number. (Social Security numbers can only be issued to people, whereas the IRS issues EINs to businesses.)

This number is necessary to open a corporate bank account and file taxes. Some of the questions on the EIN application have tax implications, so it might be a good idea to consult an attorney or tax professional before registering. Owners can obtain an EIN by submitting an IRS Form SS-4.

Select a tax election

For federal income tax purposes, a corporation can elect to be taxed as an S corporation or C corporation . This decision has significant tax consequences. You don’t need to file anything additional if you would like the IRS to tax you as a C corp. If you would like the IRS to tax you as an S corp, now would be the time to file IRS Form 2553.

Obtain required licenses and permits

Your corporation should determine whether it needs any permits or licenses to operate. If so, you must apply for both, likely with both a state and local agency.

Start your Corporation today!

While the process for incorporation may be complicated, there are many benefits to doing so. If you elect this business structure, it’s vital to fulfill corporate requirements in order to maintain corporate personhood and liability protection.

Make sure you perform due diligence when filing and seek legal assistance if needed. If you register correctly, choosing a C corp structure could put your company in a position for long-term success.

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Questions on Corporations

What’s the difference between an LLC and a corporation?

Limited Liability Corporations are owned by members, and each member owns a portion of the business, totaling 100%. Corporations or Inc. are owned by shareholders and have the ability to offer stock to outside investors or traded publicly. LexLine Corporate Services will help you decide what business entity best fits your needs.

Why should I incorporate my farm operation?

There are numerous potential benefits to incorporating a farm operation or creating a limited liability company, including:

Liability protection: Incorporating a farm operation can provide liability protection for farmers by separating their personal assets from the assets of the business. This can protect the owners’ personal assets in the event that the farm operation is sued or incurs debt it cannot pay back.
Tax benefits: Incorporating a farm operation may provide tax benefits, such as the ability to claim deductions for business expenses and the ability to pass profits or losses through to the owners’ personal tax returns.
Succession planning: Incorporating a farm operation can make it easier to transfer ownership or management of the farm to the next generation or to other stakeholders, such as through the sale of stock.
Professionalism and marketing: Incorporating a farm operation can lend a sense of professionalism and credibility to the business, which can be helpful when working with lenders, suppliers, and customers, especially when the farm is a niche operation or caters to a specific market.

Please note that incorporating a farm operation involves additional time and expense, and it may not be the right choice for every farm. It’s a good idea to consult with a lawyer or other professional to determine whether incorporation is the best option for your farm operation.