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1) What are the benefits of incorporating?
2) What are the disadvantages of incorporating?
3) How many directors and officers are required to form a corporation? In most states, one person can form the corporation. That person can hold ALL offices - Board of Directors, President, Secretary and Treasurer. The Officers (President, Secretary and Treasurer), run the day-to-day operations of the corporation. Each has their specific duty, depending on the size of the company. The President The President has the overall executive responsibility for the management of the corporation and is directly responsible for carrying out the orders of the board of directors. He or she is usually elected by the board of directors. The Treasurer The Treasurer is the chief financial officer of the corporation and is responsible for controlling and recording its finances and maintaining corporate bank accounts. Actual fiscal policy of the corporation may rest with the Board of Directors and be largely controlled by the president on a day-to-day basis. The Secretary The Secretary is typically responsible for maintaining the corporate records. 4) Who owns the corporation? The stockholder(s) are the owner(s) of the corporation; they have made an investment (financial, property or maybe some expertise) in exchange for owning some or all the stock of the company. In general, since the stockholders elect the people who serve on the board of directors, the corporation is controlled by the stockholders. Stockholders who own more than 50% of the corporation's common stock will have the ultimate power in the running of the business. 5) Do I need an attorney to form a corporation? No. We cannot provide legal advice, but we can prepare all documents for you to form your corporation. Our service allows you to incorporate quickly, effectively and easily at a fraction of the cost of an attorney. We have several years experience at the administrative aspects of the process and provide quality service at a reasonable price. 6) Does the corporation have to issue stock? Shares of stock represent ownership of the corporation. Where no shares are issued, no individual owns the corporation. If you are the sole owner of the company and hold all offices, you will also own all the stock. You can sell shares of stock to other parties as you see fit. 7) Does one stock certificate represent one share of stock? One stock certificate can represent any number of shares up to the amount authorized on the Certificate of Incorporation. If necessary, at a future date the Certificate of Incorporation can be amended to allow the corporation to insure additional shares of stock. 8) What is Par Value? A business corporation must sell shares of stock in order to capitalize the corporation, that is, provide the corporation with its own capital, separate from the money of its owners. This separation provides part of the support for shielding the shareholders from personal liability for the debts and obligations of the corporation. Shares of stock sold by the corporation represent proportionate ownership interests held by shareholders in the corporation. "Par value" is a dollar value assigned to shares of stock which is the minimum amount for which each share may be sold. There is no minimum or maximum value that must be assigned. Shares may also have "no par value," which means that the Board of Directors will assign a value to the stock below which the shares cannot be issued. There is no minimum number of shares that must be authorized in the articles of incorporation. One or more shares may be authorized. However, the corporation may not sell more shares than it is authorized to issue and it must receive consideration in exchange for its shares. 9) What is the difference between PAR and NO PAR value stock? Par value stock has a stated value on its face. This is the minimum amount contributed by the stockholder. No par value stock has no stated value. The corporation may issue the stock for any amount per share which is determined by the Board of Directors. 10) Is there extensive paperwork for me to complete to incorporate my business? No. The process to form your incorporation is easy. The order form contains all the information we need to form the corporation. We will complete the articles of incorporation (called Certificate of Incorporation in some states) for you and return it to you for your signature. We will also provide a stamped, pre-addressed envelope for you to use to mail the document to your state's office for filing. All you need to do is sign, include the state filing fee and mail the documents! 11) Are there annual filings if I incorporate? Yes. Corporations file an annual tax return (IRS Form 1120 or 1120S) and a simple one page annual state report which updates information such as the address of the corporation and the names of its officers and directors. State tax filings vary from state to state and you should consult with your accountant for requirements. 12) What is a "C" corporation? The term "C" corporation stands for the way in which your corporation will be taxed by the IRS. There is a corporate income tax on the profits of a "C" corporation. In addition, if a dividend is paid to the stockholders from the corporation's retained earnings, the dividend must be included on the stockholders personal tax return. Therefore, the profits of a "C" corporation are subject to possible double taxation. The corporation you form will be taxed as a "C" corporation this year unless you file IRS form 2553 to elect tax status as an "S" corporation. 13) What is an "S" corporation? The term "S" corporation stands for the way in which your corporation will be taxed by the IRS. There is no corporate income tax on profits; instead the annual profit of an "S" corporation is included on the personal return of each stockholder. IRS form 2553 must be filed within 75 days of incorporation to be treated as an "S" corporation for tax purposes. We provide this form to you with your completed Articles of Incorporation. 14) What Is A Registered Agent And Do I Need One? Most state laws require an individual located in the state of incorporation to be available during regular business hours to receive legal notices and other official documents from the state. This person is called the Registered Agent. If you have a street address in the state in which you are incorporating, you do not need a Registered Agent. SavvyChicks.com does not act as a registered agent for any corporation we form. 15) What is a nonprofit corporation? A nonprofit corporation differs from a for profit corporation in the establishment of membership. Nonprofit corporations may not issue stock; therefore they do not have shareholders. Likewise, members of a nonprofit corporation do not invest in it; however they may pay dues, or contribute donations. 16) Who is an incorporator? An incorporator is simply the person or persons who signs the articles of incorporation. 17) Am I personally liable for my corporation's obligations? The risk of a shareholder is limited to his or her initial investment. In contrast, a sole proprietorship or a partnership submits its parties to unlimited liability for business debts. 18) Will incorporating protect my personal assets? If done properly, incorporating will protect your personal assets from the liabilities incurred by the company. 19) Can the owners of a Corporation lose their limited liability privilege? Yes, in some cases the courts will "pierce the corporate veil" and treat the incorporated entity as a sole proprietorship or a partnership. This can happen if the corporate entity is basically an alter ego for its owner or when there is shareholder misconduct, or if corporate formalities are not performed in a timely manner. 20) What is a Close Corporation? This type of corporation is also known as a "closely held" corporation. A close corporation is generally comprised of a limited number of shareholders. Closely held corporations are usually subject to restrictions on the transfer of stock and are typically not traded on the major stock exchanges. Most of the shareholders participate in the management. Therefore, the transferability of shares is restricted. 21) What should I keep in mind when I name my corporation? When choosing a name for your corporation, it is crucial that you select a name that is not in use by someone else. First, the Secretary of State will reject any corporate name that is deceptively similar to an entity already existing in your state. A quick check with the Secretary of your State will alleviate this problem. In some states you may even reserve your company name before filling. Second, you should not start your business by infringing on someone else's trademark. Once you know that your name is available, make sure you add to it a phrase indicating that yours is an incorporated entity. In order to do that, you must add one of the following names or their abbreviations: corporation, incorporated, company, or limited. 22) What is a Federal Tax Identification Number? A federal tax identification number is assigned to a business entity by the federal government for tax purposes. This number is required for some of the corporation's paperwork, for example, for the "S" corporation tax designation form. 23) How long is the incorporation process? Processing times for incorporating a company vary among the different states and change constantly depending on the workload at the state office. Paperwork is usually processed within two to four weeks. 24) What are Articles of Incorporation? A Corporation's "Articles of Incorporation" is the main filing document which begins the corporation's existence under state law. Once filed, the corporation comes into existence. The level of complexity for a corporation's Articles of Incorporation can range from very simple to extremely complex. Generally, most jurisdictions require Articles of Incorporation to contain, at a minimum, information about the Corporate Name, the Registered Agent, and the Corporation's business address. Requirements vary by state. 25) What are Bylaws? Bylaws serve as the internal operating document for the corporation. Generally, Bylaws detail the responsibilities, rights, and duties of directors, shareholders and officers. Currently states generally do not require that Bylaws be filed. 26) What is a Corporate Director? The Board of Directors is essentially the management body for the corporation. Responsibilities of the Board of Directors include establishing all business policies and approving major contracts and undertakings. In addition, the Board may also elect the President. Ordinary business practices of the corporation are carried out by the Officers and employees under the directives and supervision of these Directors. The Directors must act collectively for their votes and decisions to be valid. That's why Directors may only act at a Board of Directors meeting. This, however, requires certain formalities. One such formality is that the Directors must all be notified of a forthcoming meeting in a prescribed manner, although this can be waived or provided for in the corporation's Articles of Incorporation or Bylaws. For a Directors' meeting to be valid, there must also be a Quorum of Directors present. A Quorum is usually a majority of the Directors then serving on the Board; however, the Bylaws may specify another minimum number or percentage. The Board of Directors must meet on a regular basis (monthly or quarterly), but in no case less than annually. These are the regular Board meetings. The Board may also call Special Meetings for matters that may arise between regular meetings. In addition, boards may call a special shareholders' meeting by adopting a resolution stating where and when the meeting is to be held and what business is to be transacted. The first meeting of the Board of Directors is important because the Bylaws, the Corporate Seal, Stock Certificates and Record Books are adopted. Board members, like officers, have a fiduciary duty to act in the best interests of the corporation and cannot put their own interests ahead of the corporation's. The Board must also act prudently and not negligently manage the affairs of the corporation. Finally, the Board must make certain that it properly exercises its authority in managing the corporation and does not abrogate its responsibilities to others. This means that the board must be very careful to document that each Board action was reasonable, lawful and in the best interests of the corporation. This is particularly true with matters involving compensation, dividends and dealings involving Officers, Directors and Stockholders. The record or Corporate Minutes of the meeting must include the arguments or statements to support the Board action and must detail why the action was proper. 27) Where can I get a Corporate Seal? While many jurisdictions have abolished the requirement of maintaining a corporate seal, many corporations still prefer to maintain a corporate seal as a formality. Corporate seals range in price from $8 (rubber stamp) to about $75 (steel embosser). Please contact your local stationer to obtain a corporate seal. You'll need to know the name of your corporation and the date of incorporation before you can order it. 28) Must I file a D.B.A.? Individuals and unincorporated entities that regularly conduct business using an assumed name (often referred to as a "d.b.a.") must file an assumed name certificate with the county clerk in each county in which business premises are maintained. If corporations, limited liability companies or limited partnerships (entities created by filing with the secretary of state) do business with a name that is different than the name set forth in the organizational documents, they must file assumed name certificates in the county or counties where the registered office and the principal office are located, and must also file with the secretary of state. 29) If I incorporate, will doing so prevent others from using my company name? Incorporating will not keep another business from using your name. Generally, every business must protect its own business name and the good will that it has acquired from the sale of its goods or services in a specific geographic area. Filing articles of incorporation only prevents the Secretary of State from filing a document to create another corporation, limited liability company or limited partnership that has the same, a deceptively similar, or similar name as the entity already in existence. 30) Can I protect a trade name nationwide? There is no national registration of trade names. Generally, businesses, including corporations, protect their trade names by registering their trade name as a service mark or trademark. Because of the legal complexities involved, we recommend that businesses obtain private counsel to get advice on how to protect a trade name in interstate commerce. 31) Can the same person be the shareholder, director and all officers of a corporation? While jurisdictions will vary in their requirements, most states require that there be two officers, President and Secretary. Most states allow one natural person to hold both offices and be the sole director of the corporation. Usually, that one person may also be the sole shareholder. A corporation may not be a director of another corporation. 32) Do I need to publish a notice of incorporation? While a few jurisdictions require that the corporate name be published in a newspaper local to the county of the registered agent (Georgia, Arizona, Illinois, and Pennsylvania), most jurisdictions do not require publication unless an existing unincorporated business intends to incorporate without a change in its name. That business must then publish its intent to incorporate in the local newspaper for four consecutive weeks (in most jurisdictions).
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