Once You've Decided to Incorporate

LLC laws vary by state. You are required to file corporate articles and pay filing fees as with conventional incorporation. You also have to file an "operating agreement," which is like a partnership agreement and takes the place of corporate bylaws. "LLC" must also appear as part of the company name. And you'll need to elect whether to have "pass-through" taxation (like an S corporation) or be taxed at the corporate level.

Regardless of what type of corporation you decide on, you'll have to file either Articles or a Certificate of Incorporation (with your state's Commissioner of Corporations or Secretary of State), and then pay a fee. It's a good idea to consult an experienced attorney during this process, to ensure that you're aware of your options and the legal and tax consequences of any decisions you make. Filing for incorporation requires that you make the following decisions and provide the appropriate government entity with the information:

• Pick the name of the corporation. (Read Reserving a Corporate Name for details on this process.)
• Provide the names and addresses of the incorporators.
• Issue stock/determine shareholders.
• Appoint directors and officers.
• Decide the initial capital investment.
• Make the necessary tax filings.
• Set up a corporate record book.
• Adopt board resolutions regarding corporate organization.
• Establish a corporate bank account.
• Provide the name of a representative for formal service of legal documents.

After the corporation is formally established, it must remain financially and legally separate from any of its shareholders, to preserve the benefits and protections of corporate legal status. Maintain healthy business procedures like keeping specific records and accounts, filing necessary government documents, and holding regular shareholder meetings or getting written consents or waivers by directors and shareholders.

As mentioned earlier, you don't have to incorporate in the state in which you live or establish your business. Picking the State of Incorporation for Your Small Business explains some of the considerations in this decision.