Incorporating a business allows those involved to remove any personal liability for the business. For example, if the business becomes involved in legal proceedings, the corporation's assets are at risk, not the individuals that comprise the corporation. Turning the business into a corporation is a fairly simple task but does vary from state to state.

Where to Incorporate

Each state has its own laws regarding corporations, but Delaware and Nevada have availed themselves to corporations by offering business-friendly courts and state governments. Research the various state laws regarding corporations to find which best suits the needs of the company.

How to Incorporate

Contact the secretary of state's office for general information, or visit the website, about the forms necessary to file for incorporation. Articles of incorporation are the first step for the process. This will address the name of the business, its purpose, the individuals involved and the location of the business. Next, a set of bylaws must be created for the company. The bylaws go into greater detail than the articles and address certain issues such as when stockholder meetings will be held, the responsibilities of the officers of the company and the responsibilities of the shareholders as well. The decision must also be made as to which type of corporation the company should become: LLC, S-type and so on. After these have been drawn up, deliver them to the secretary of state's office, and once they have been accepted, the office will issue a certificate of incorporation. Once the certificate is received, conduct a shareholder's meeting to elect officers for the board of directors and discuss any other business at hand.

Things to Know

If the company is doing business in a state other than where it is incorporated, it is considered a foreign corporation and must file for a license to do business in another state so it will not lose access to state courts or face tax penalties. The officers of the corporation still have a fiduciary responsibility to the corporation, and their actions must reflect what is best for the company, not what is best for themselves. Doing so opens the officers to the legal possibility of having their personal assets available to cover the company's debts.

Source:

Small Business Guide to Incorporation

State Licensing Requirements for Incorporation