General Incorporation FAQs
These are the most commonly asked questions about filing a new corporation.
How many officers and directors are required?
Every corporation must have three officers: President, Treasurer/CFO, Secretary (or clerk).
One person may generally serve in all three capacities, although the person’s responsibility and authority necessarily changes through the different offices the person assumes. In addition to these statutory offices, there may also be vice presidents and/or assistant secretaries or clerks.
In most states, only one director is required. In some states, the amount of directors a corporation is required to have is determined by the number of shareholders. For example, if the number of shareholders is four, then the C corporation must have four directors.
What is a registered agent?
A registered agent is typically an individual, business entity, or in some states, a corporation that has filed additional paperwork with the state filing agency so they can become a registered agent. If your corporation is ever involved in a lawsuit, the plaintiff’s attorney and/or the court, will serve your corporation via a process server to inform you of the suit. Even though a corporation is a separate entity, it cannot answer the door and physically accept the court document in its hand. Therefore, state filing agencies require that a corporation designates a Registered Agent. The state filing agency requires that the Registered Agent maintains a physical address (no P.O. Boxes or PMB’s) in the state in which the company is doing business. The Registered Agent is also required to be available at the physical address monday through friday during normal business hours to accept service of process. The name and address of the Registered Agent will become public record that anybody can access. For a small annual fee, SunDoc Filings can act as Registered Agent on your company’s behalf. The Registered Agent will take the responsibility of being served and forward all service of process to your company immediately. We can act as a Registered agent for your company in any of the 50 states and the District of Columbia. For more information, please click here.
What is a share’s par value?
The par value of a share of stock is its minimum stated value. Par value typically does not correlate to the actual value of a share. Common par values are $0.01, $1.00 or no par value. The actual value of a share is its fair market value, or what someone is willing to pay for a share of stock. For public companies, actual value is determined by the price investors are willing to pay for each share on the national exchange. For private companies, it is typically determined by the overall value of the corporation or the book value.
How do I obtain or prepare corporate by-laws?
The corporation's bylaws set forth the company's rules and regulations. Similar to bylaws, an operating agreement provides the framework for operating the Limited Liability Company. Companies do not file the bylaws or operating agreements with the Secretary of State. Instead, businesses keep them with their internal company records. When you order a corporate/LLC kit, sample bylaws are included.
What is a publication requirement and are there publication requirements for a corporation?
Some states require new corporations or newly qualified corporations to publish in a widely circulated newspaper some information about their business. Currently, the only states that require corporations to publish are Arizona, Georgia, Nebraska and Pennsylvania. SunDoc Filings can help your company meet its publishing requirements in all four states for an additional service fee or you can make arrangements on your own. Please contact us for further questions regarding publication.
How do I form a corporation?
The information required for filing Articles of Incorporation or a Certificate of Incorporation varies by state and type of business. If you incorporate through SunDoc Filings, simply complete our online order form or place an order by phone and we prepare and file your Articles of Incorporation. You must also pay filing fees and any applicable initial franchise taxes or other fees.
Do I need an attorney to incorporate?
No. You can prepare and file the Articles of Incorporation yourself, but you should understand the requirements of your intended state of incorporation. If you are unsure if incorporation will benefit your business, or what business type you should form, you should consult an attorney or accountant.
What is double taxation?
Double taxation occurs when a C corporation's profits are taxed at both the business and individual levels. Business profits are reported and taxed at the corporate level first. Then, if the C corporation distributes any remaining profits to shareholders in the form of dividends, shareholders must report the dividend as personal income and pay taxes on it at the individual level. To avoid double taxation, many business owners choose to make a special election with the IRS to become an S corporation.
Which state is is best for me to incorporate?
Once you’ve decided to incorporate, the next step is to decide where to incorporate. It is not a requirement to form your company in the state where it is physically located (the home state), but there are factors to consider when evaluating which state is best. For small businesses, two factors are typically considered when deciding where to form a C corporation: the cost of forming in the home state versus the cost of forming in another state and the taxation and ongoing corporate requirements of the states under consideration.
1. Home state incorporation versus foreign qualification: If the C corporation is a closely held corporation, meaning it has one or few shareholders, and does business primarily within a single state, incorporation within the home state is often preferable. The cost of home state incorporation will usually be less than incorporating and registering to do business in another (foreign) state.
A corporation that qualifies to do business in another state is subject to taxes and annual report fees from both the state of incorporation and the state of qualification. Another disadvantage of incorporating outside of your home state is the possibility of having to defend a lawsuit in another state.
2. Corporation requirements and taxation: When deciding where to incorporate, it’s also good to research that state’s ongoing corporate requirements (such as annual report and franchise tax requirements) as well as general state taxation requirements.
What are the advantages of forming a corporation?
Limited Liability - the owners are not personally liable for debts and obligations of the corporation. They can personally lose only to the extent of their investment in the corporation from purchasing stock. Capital can be raised more easily than under other forms of business entities through the sale of stock.
Ownership in a corporation is more easily transferable with other business entities. Under most circumstances, shares of stock can be sold without restriction to a third party without having to obtain consent from the corporation itself.
Unlike a sole proprietorship, partnership, or limited liability company, the corporation continues to exist even if an owner (shareholder) dies or sells his shares of the business. Since the corporation is an independent legal entity, it has a continuous existence. It does not cease simply because one of the owners dies or retires.
Corporations are the most well known and widely recognized type of entity. Corporations often have an easier time setting up insurance, retirement funds, defined contribution plans, money-purchase plans, and other profit-sharing, pension and stock option plans than other business entities.
Do I also need to file a DBA (assumed name)?
A DBA (Doing Business As) or assumed name is the legal term for registering your business name. In some jurisdictions it is called a fictitious owner affidavit or fictitious business name. The purpose is to avoid confusion and fraud in the marketplace. Because real names and addresses are required on the application, creditors and other interested parties can connect a business name to the actual owner of the business by looking up the DBA. Filing a DBA protects the public from fraudulent use of a name – preventing someone from ‘hiding behind a business name’ – and protects the registered business from others who might try to impersonate them by doing business under that name.
How many officers and directors are required? Every corporation must have three officers: President, Treasurer/CFO, Secretary (or clerk).