Structuring a company is one of the biggest challenges, especially for entrepreneurs who are starting their own businesses at a young age. Sifting through your options can be overwhelming, and trying to understand which business structure your company should adopt requires extensive research. Whether it’s a corporation, limited liability, or a general partnership, you should understand the regulations that incorporate each modal or prototype.
Corporations offer the best safeguards against liability, giving their owners and shareholders protection advantages, as they are viewed as separate legal entities. Although corporations are among the most complicated of all business structure models in terms of regulations, they remain the safest in business liabilities protection. If you decide that incorporating your business is what best suits your business identity, you must understand the risks, advantages, and disadvantages of the corporate world. Here are 9 things young people need to know about the corporate world.
Starting a Corporation
At this stage, you must be done with all the research and come to the conclusion that starting a corporation is your best option. The registration process is the next step, but first, you should find the right business name in order to register and complete the paperwork according to the rules and legislations of your state or country. The name you choose for your business must be different; you can’t use the name of an already existing entity. Use online searches to help you navigate the many restrictions in this area. For example, you can’t use the word “bank” unless you’re registering as a financial organization. Also, the name must end with the abbreviations of one of three words: company, incorporated, or corporation.
Decision Makers or Directors
The names of directors or decision-makers must be included in your article on the corporation. Identify the type of decision-makers, whether directors or incorporators. As an owner, you can list your name as a director as well. It is the responsibility of the incorporator to prepare and file the articles of incorporation; Afterwards, a board of directors should be elected or chosen.
The shareholders are the owners of the corporation and the owners of the shares of stocks in the business. The number of stock shares issued must be listed in the articles of incorporation, however, the names of the shareholders are not usually listed. However, the internal records must incorporate the names of the shareholders and the numbers of shared stocks issued under each name.
The Corporation Address
In order to register your corporation, the articles must include an existing and real address locating a person or an agent to receive notices, lawsuits, and all the legal documents on behalf of the corporation. You can possibly hire a professional registered agent if you don’t have an office in the same place where you incorporate.
Writing Bylaws of your Corporation
The corporate bylaws are the governing rules of your corporation, in which all the details of your corporation are going to be listed. Information such as the number of the share stocks issued, procedures that organize record-keeping, and the number of directors or decision-makers required should be all covered here in writing your bylaws. Although this step is not required during the filing process, it is very important for legal reinforcement and assistance. You must make sure that all your documents are complete and that nothing of importance is missing.
This step is optional since not all corporate owners create a shareholder agreement draft, but it’s highly crucial in some situations to protect the rights and interests of shareholders. This agreement is effective in the event of the corporate owner’s death or any other circumstance requiring the transfer of shares to beneficiaries. It’s better to consult a business lawyer when writing a shareholder agreement.
The Board of Directors
A company might assign several directors to manage the corporation; holding an initial meeting for all the members of your board to assign all of them their responsibilities is a very important step. Identifying and clarifying the board with all the directions will establish a solid ground for all the decision-making and structuring of the corporation. This meeting should clearly cover corporate bylaws, authorization of stock issuing, tasks of corporate officers, and gaining approvals for corporate status.
Licenses and Business Permits
Obtaining the required licenses and business permits is a crucial step and should be implemented even before operations begin. Federal and state government laws, city and country laws, and the structure of your business are what determine the permits and licenses required. Before you start with the application process, you need to ensure that you are compliant with all the requirements that regulate your corporate industry or business.
Corporate Bank Account
In order to complete the process of establishing your corporation, you have to open a corporate bank account. A separate bank account will protect your personal finances from business liability. The documents required for opening a corporate bank account should include the employer’s identification number, the articles of incorporation, and corporate objectives or resolutions. While a tax ID number might not be a direct requirement when opening a corporate bank account, it is still a crucial step to obtain a tax ID number to ensure taxes are paid.
One of the advantages of establishing a corporation is the separate legal entity it holds that protects its owners from business liability. The formation of corporations is a complicated process that requires a substantial amount of documentation in order to complete registration. A great benefit of starting a corporation is that it’s subject to the same rights and responsibilities as individuals are, in terms of loans, contracts, lawsuits, and tax payments. Company formation agents and business service providers can help you to register your corporation with fewer errors. Problems in filing may lead to the rejection of documents. Business service providers can also offer company account creation, statements for filing confirmation, stock shares issuing and transfer, company suspension, and other services that facilitate the corporation formation process. Writing the bylaws of your corporation is of great importance for legal assistance. The number of shareholders, the share of stocks, and the number of directors or decision-makers are all information that should be included in the bylaws.