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A C corporation is the basic legal structure making a business a separate legal entity. Federal law views corporations as individual taxpayers that are responsible for their own conduct, bills and taxes. Also known as regular corporations, C corporations are typically formed to protect business owners from catastrophic financial responsibility caused by business setbacks or failures. There are multitudes of online services to help business owners who are forming a C corp, but doing it yourself is not difficult if you take it step by step.
Choose a State
Business owners can register the corporation in any state. However, as location determines setup costs as well as the tax rate and recurring fees assessed, conduct careful research before deciding. Filing fees range from $50 to $725. Nevada is the most expensive state, with filing fees of $725. Arkansas, Colorado, Hawaii and Iowa are the least expensive at $50.
Depending on where you operate your business, another state’s fees can appear very attractive, but corporations registering out of state incur additional costs. The state where you do business will typically classify a C corporation registered in another state as foreign and assess additional registration and permit fees, which can nullify any savings.
As you look into states, you should also check each state's requirements for naming your business. You will need to check for name availability, as you can't choose a name already in use by another business. States typically have a name registry that you can search using your potential business names.
Identify the Decision Makers
The next step in forming a C corp is naming the C corporation’s board of directors. While some states require only one incorporator, others require there be a chief executive officer, secretary and treasurer. Additionally, your state may or may not allow the board to be made up solely of owners; contact your secretary of state’s office to determine the laws governing a corporate board’s structure where you do business. The board of directors is responsible for making the corporation's major decisions; work to ensure they provide a broad range of expertise.
Alert the State
File articles of incorporation with the secretary of state. This one-page form details the company’s name, physical address and directors. The articles must also include the name and contact information of the registered agent; this is the person responsible for accepting and acting on all corporate legal matters and is usually an owner or board member. Filing the articles does not form a corporation; they are simply legal notification of intent to set up a C corporation.
Formalize Bylaws and Voting Procedures
Complete the bylaws. These are rules that will govern the C corporation’s daily operations. They dictate everything from stock issuance to meeting quorums. It is not necessary to reinvent the wheel; fill-in-the-blank bylaw templates, which are accepted by all 50 states, are easy to find and download online.
Call the First Meeting
Call the initial shareholders meeting to ratify the C corporation’s bylaws, officially seat its board of directors, set up the fiscal year and determine type of stock to be issued as well as authorize the stocks’ issuance. Both federal and state law mandate that all corporate decisions be put to a vote and that said vote as well as all shareholder proceedings be documented in their entirety. Arrange for detailed minutes to be recorded of this and every shareholders meeting.
Finalize Filing Formalities
The final step to forming a C corp is to amend your articles with the secretary of state’s office to include the C corporation’s bylaws, a statement of the corporate form and management structure, a description of the type of business the corporation will do, as well as the number and classification of stock shares. It typically takes four to six weeks for the state to approve the paperwork and issue a certificate of incorporation.
Based in Arlington, Texas, Michelle Diane has been writing business articles for six years. Her work has appeared in newspapers nationwide and on diverse digital outlets including Bounty, Breathe Again Magazine and LexisNexis. She is a University of Texas graduate and a presidential member of the National Society of Leadership.