Corporations aren't people, but people establish corporations. Incorporation is the act of creating a legal entity with a corporate structure, such as an LLC or S Corp. Incorporators are the human beings who iron out the legal issues and file the papers.
TL;DR (Too Long; Didn't Read)
An incorporator is an individual who files articles of incorporation and oversees the process of creating a legal and financial entity organized under a corporate structure.
Who Can Be Incorporators?
Incorporators are most often lawyers who are familiar with the list of documents you need to file to license and register a corporation. An incorporator need not be a shareholder or board member of the company. However, as the corporation evolves as an organization and forms its own board of directors to attend to strategic developments, it will be in the best interest of both the lawyer and the organization for the lawyer to step aside as the legal representative of the company.
You can be an incorporator for your own corporation, especially if it is simply structured. For example, an LLC can be almost as simple as a sole proprietorship, with an individual owner just looking to place some legal insulation between business and personal assets. If you have some familiarity with the process and requirements, you can file your own incorporation documents and become your own LLC organizer. However, it's still advisable to consult with a lawyer about your articles of incorporation and your choice of business structure.
What Do Incorporators Do?
An incorporator is responsible for drafting articles of incorporation and filing startup legal documents with your state's secretary of state. This process will include filling out applications, paying fees and addressing questions about how you want your corporation to be structured and governed. The incorporator's signature will appear on the corporation's formation document even if that individual isn't a shareholder or board member.
Because incorporators must include their own contact information when they go on record as representing a business, they may receive communications from the state regarding that business even after the initial incorporation tasks are complete and the incorporator's role is obsolete. If you own or participate in a company that has been incorporated, you should inform your state's secretary of state office of the new contact person's name, address and email.
Reasons to Incorporate
Using a corporate structure can protect your personal assets from risk of loss if your company fails or if you are involved in an expensive lawsuit. Organizing your business as a C or S Corp will also allow you add owners and shareholders, in contrast to sole proprietorships and partnerships, which must be reregistered as different business entities when their ownership parties change in any way.
However, C and S Corps are complicated to form, usually requiring the services of an incorporator. These business structures also require more paperwork than a simpler business structure, including board meeting minutes and annual reports filed with your state's secretary of state.
Types of Corporations
- Limited Liability Corporation: As the simplest type of corporation to form, an LLC most closely resembles business structures such as partnerships and sole proprietorships because the business entity is closely linked with the individuals who own and run the company. An LLC pays taxes the same way as these simpler business structures, with all profits passing through and becoming individual income for the owners.
- S Corps and C Corps: These types of corporate structures are more appropriate for larger, more complex businesses. Like an LLC, the profits from an S Corp flow through the business entity and are taxed as private income. In contrast, C Corp income is double taxed at both the individual and corporate levels.
Devra Gartenstein founded her first food business in 1987. In 2013 she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.