If your corporation has employees (including shareholders who are employees), then the corporation and shareholders are responsible for payroll taxes. The corporation must pay half of the employee’s share of Social Security and Medicare taxes (known as “FICA taxes”) and unemployment taxes. The employee must pay the other half of the FICA taxes as well as income tax on their salary. You’ve legally formed your corporation and prepared all of your governing documents.
Large corporations must register their stock offerings with the federal Securities and Exchange Commission (SEC) and the state securities agency. Registration takes time and typically involves extra legal and accounting fees. However, in March 2025, after some constitutional challenges, FinCEN revised the BOI reporting rule so that the requirement only applies to companies created outside the U.S.
It’s also a requirement of doing business as a corporation—and you must act like a corporation at all times to qualify for the legal protections offered by corporate status. If you have knowledge and experience creating rules for a corporation or drafting formation documents, you can probably write the bylaws yourself. But if you’re unsure about what to include or need legal advice working through the details, you should talk to a small business attorney. The incorporators or board of directors (or shareholders, if your bylaws require it) will adopt your company’s initial bylaws. Your corporate bylaws should outline how your company will be managed, regulated, and maintained. Apart from annual reports, your corporation will need to file and pay applicable taxes to the local, state, and federal governments.
Beyond her professional accomplishments, Natalie is driven by her love for writing and research, and is committed to maintaining a growth mindset. Not only is she passionate about learning and growing, she believes in embracing a healthy lifestyle. While you don’t exactly need a business plan to start a business, it’s a good idea to create one.
You should use minutes to record actions during all board and shareholder meetings. A registered agent plays a crucial role in the formation and operation of your LLC. This individual or business entity is responsible for receiving legal documents, such as lawsuits and official government notifications, on behalf of your limited liability company.
She is a former Google Tech Entrepreneur and she holds an MSc in International Marketing from Edinburgh Napier University. The Small Business Administration (SBA) has a chart of industries subject to federal licensing. Contact your state and local governments for information about additional licenses you need in your locality. Corporate bylaws provide a roadmap for how the company will be run and how decisions will be made.
- Comprehending these elements will set a solid foundation for your business.
- Kelly DuFord Williams, founder and managing partner of Slate Law Group, outlined six general steps a small business must take to become a corporation.
- Although filling out the form may only take a few minutes, it could take weeks or even months to prepare all the documents you will need to file the articles of incorporation.
- Speaking with someone specializing in small business accounting can show you how a C corp exposes you to double taxation, whereas an S corp does not.
They can deduct a wide range of legitimate business expenses from their taxable income, including salaries, benefits, advertising costs and office supplies. Additionally, some jurisdictions impose lower tax rates on corporations. Corporations are also unique because they can retain (reinvest) their earnings within the company, allowing them to defer tax payments.
Penalties for not maintaining a Registered Agent may include fines or revocation of business’s corporate legal status. Losses are also fully deductible for a corporation, and a corporation’s profits can be left in the business for further expansion of the business. These benefits don’t always outweigh the potential negatives for a business, so it is a wise decision to consult an accountant about the best entity type relative to your business goals.
Alternatively, you can file any time during the tax year preceding the tax year the S corporation status will take effect. Your corporation must file and pay taxes to the Florida Department of Revenue (FDOR). You can file and pay taxes online by enrolling in FDOR’s eServices.
Limited Liability Protection
- You’ll likely need to register for other tax accounts to pay all applicable taxes owed.
- They appoint corporate officers to manage daily operations and assure compliance with laws and regulations.
- Nonprofit organizations may structurally resemble C corporations, but they must handle their profits differently.
When forming a corporation in California, you must also file a Statement of Information. This document must be filed within 90 days of filing your articles of incorporation. A crucial step in forming a corporation is opening a corporate bank account. This account will be separate from the bank accounts of its owners, which helps protect your personal funds from any business liabilities. LegalZoom works with Bank of America to help our customers open business checking accounts. Issuing stock can be complicated, and it must be done in accordance with securities laws.
Incorporating your business separates you from your business as a separate legal entity, preventing you from being fully responsible for any debts accrued by your business. To get started, you’ll need to gather important documents like your LLC’s Articles of Organization, Employer Identification Number (EIN), and operating agreement. Opening a business bank account is one of the vital steps in establishing your LLC, as it allows you to clearly separate personal and business finances.
Most states have followed suit and provide their own version of this exemption. So if you have a smaller corporation with limited investors and owners, you probably won’t need to register the sale of your corporation’s stock. Generally, when corporations issue stock, they must register the sale of their shares with the Securities and Exchange Commission (SEC) and their state securities agency. However, many smaller corporations qualify for an important registration exemption. When you issue stock, you should have the shareholder sign a shareholders’ agreement. A “shareholders’ agreement” is a contract among the shareholders about how the corporation will be run and the rights and responsibilities of each shareholder.
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Each state has different laws, taxes, and fees, so it is important to research the options and choose the state that is best for your business. The articles of incorporation outline the structure and purpose of the corporation and need to be filed with the state’s business filing office along with a fee. As a business owner, it’s important to stay informed on what is required of you after forming a corporation. Check with your state or consult with a lawyer for more information regarding the specific requirements to remain compliant.
What Is the Difference Between a Limited Liability Company and a Corporation?
After you’ve filed your articles, created your bylaws, held your first directors’ meeting, and issued stock, you’re forming a corporation almost ready to start your corporation. But you still need to obtain the required licenses and permits that anyone needs to start a new business. If you’re selling shares of stock to passive investors (people who won’t be involved in running the company), complying with state and federal securities laws gets complicated.
