Many of our business-formation clients are successful consultants who have outgrown the sole proprietor structure. They need a more complex and robust form, but don’t know where to turn for advice without hiring another consultant or lawyer at an expensive hourly rate. After months of deliberation, they realized that a sole proprietorship was not enough to protect them and looked into incorporating.
A corporation is a legal entity that separates the business from its owners. It can do things like buy and sell property, be taxed, enter into contracts- but most importantly it protects the owner’s personal liability for any debts or obligations incurred by their company. Limited Liability allows for only what they invested in to be at risk, and not their entire life savings or future earnings.
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Articles of Incorporation
An incorporation document is the first step in establishing a company. This lays out what type of business it will be, how many shares are authorized to issue, and more importantly who owns those shares. This document is filed with the Secretary of State to establish your company and identify how many shares it can issue.
A corporation’s bylaws form the foundation of its basic structure. They are how elections are held, and describe what positions within a company exist. The level at which they’ll be run will depend on who is elected to lead them – such as chief executive officer, president or chairman of the board.
The company’s key players are all listed in this organizational document, and their positions within the corporation. How much stock they own is also clearly marked for each individual to see.
This document allows new businesses to outline how ownership should be distributed aas well as set up management structures or restrictions so that there are no power struggles within this new venture.
Statement of Information
This document is necessary for your annual report, so that the Secretary of State can know who to contact if they have any questions. It’s important you make sure all your information is accurate and up-to-date in order to avoid possible fines or penalties from not complying with state regulations.
This is the company’s tax ID number. EIN stands for Employer Identification Number and it identifies your business in order to do taxes, withholdings, etcetera with the IRS or other government agencies.