A corporation is formed by filing a document called articles of incorporation (sometimes called a certificate of incorporation) with your state’s Secretary of State or equivalent agency. This single filing is what legally brings the corporation into existence, but the full formation process involves several steps before and after that filing. State filing fees for a business corporation range from $35 to $300, with some states charging variable fees based on how many shares you authorize.
Choose a State and a Name
Before you file anything, you need to decide where to incorporate. Most small and mid-sized businesses incorporate in the state where they actually operate. If you incorporate in a different state, you’ll still need to register as a “foreign corporation” in every state where you do business, which means paying additional fees and filing additional paperwork. That double layer of compliance often makes out-of-state incorporation more expensive than it’s worth for smaller companies.
You’ll also need a corporate name that meets your state’s requirements. Every state requires the name to include a corporate designator like “Inc.,” “Corp.,” or “Incorporated,” and the name cannot be too similar to an existing business registered in that state. Most Secretary of State websites offer a free name search tool so you can check availability before filing.
Prepare the Articles of Incorporation
The articles of incorporation are the founding document of your corporation. Every state has its own form or format, but the core information is largely the same across the country. You’ll typically need to provide:
- Corporation name: The full legal name including the corporate designator.
- Principal office address: A physical street address (not a P.O. box) where the corporation’s main office is located.
- Registered agent: The name and physical address of a person or company authorized to accept legal documents on the corporation’s behalf. The registered agent must be located in the state where you’re incorporating.
- Authorized shares: The classes of stock and the number of shares of each class the corporation is authorized to issue. If you’re creating a simple structure, this might just be one class of common stock with a set number of shares.
- Incorporator information: The name and address of at least one person forming the corporation. The incorporator must generally be at least 18 years old, though a business entity can also serve as an incorporator.
Some states ask for additional details, like the corporation’s purpose or the names and addresses of initial directors. Others keep the required information minimal and let you handle everything else in your bylaws. Your state’s filing office will have instructions or a fill-in-the-blank form on its website.
File with the State and Pay the Fee
Once your articles are complete, you submit them to the state filing office along with the filing fee. Most states accept online filings, and many also accept filings by mail or in person. Filing fees for business corporations vary widely. Montana charges as little as $35, while Texas charges $300. Some states set fees based on the number of authorized shares or the total authorized capital stated in your articles.
Standard processing times differ by state and can range from a few business days to several weeks. If you need your corporation to exist by a specific date, most states offer expedited processing for an additional fee. These expedite fees can run anywhere from $25 for faster turnaround to $1,000 for same-day or 24-hour service, depending on the state.
Once the state accepts your filing, your corporation legally exists. You’ll receive a stamped or certified copy of your articles, and your corporation will appear in the state’s business entity database.
Get an EIN from the IRS
Every corporation needs an Employer Identification Number, commonly called an EIN. This is a nine-digit number the IRS assigns to your business, and it functions like a Social Security number for the corporation. You’ll need it to open a bank account, hire employees, and file tax returns. You can apply for an EIN online through the IRS website at no cost, and you’ll receive the number immediately upon completing the application.
Adopt Bylaws and Hold an Initial Meeting
The articles of incorporation establish the corporation’s existence, but the bylaws govern how it actually operates. Bylaws are an internal document (you don’t file them with the state) that spell out the rules for running the corporation: how directors are elected, how meetings are called, what officers the corporation will have, how shares are issued, and how decisions are made.
After filing, the incorporator or initial directors typically hold an organizational meeting to formally adopt the bylaws, elect officers, authorize the issuance of stock, and handle any other startup business like approving a corporate bank account. Minutes of this meeting should be kept in a corporate records book. This step might feel like a formality, but maintaining these records from day one establishes the separation between the corporation and its owners, which is the entire point of incorporating.
Issue Stock to Shareholders
A corporation isn’t truly up and running until it issues shares to its owners. The articles of incorporation authorize a maximum number of shares, but you don’t have to issue all of them right away. Shareholders pay for their shares with cash, property, or services, and the corporation issues stock certificates or records the ownership in its books. The price per share for the initial issuance is set by the board of directors.
If you’re a single founder incorporating a one-person business, this might be as simple as issuing all the shares to yourself. For a corporation with multiple founders, this is the stage where ownership percentages are locked in, so it’s worth being deliberate about how many shares each person receives and at what price.
Electing S Corporation Tax Status
By default, a corporation is taxed as a C corporation, meaning the business pays corporate income tax on its profits, and shareholders pay personal income tax on any dividends they receive. Some corporations choose to elect S corporation status, which passes income and losses through to the shareholders’ personal tax returns, avoiding that double layer of taxation.
To make the S corp election, you file IRS Form 2553. The filing deadline is no more than two months and 15 days after the beginning of the tax year you want the election to take effect. You can also file anytime during the preceding tax year. For a new corporation that wants S corp status from day one, that means filing Form 2553 within roughly 75 days of formation.
Not every corporation qualifies. S corporations are limited to 100 shareholders, all of whom must be U.S. residents who are individuals, certain trusts, or certain tax-exempt organizations. The corporation can have only one class of stock (though voting rights can differ). Banks using certain accounting methods, insurance companies, and a few other entity types are ineligible. Every shareholder must sign the election form to consent.
Ongoing Requirements After Formation
Forming the corporation is just the beginning. Most states require corporations to file an annual or biennial report with the Secretary of State, which updates basic information like the names of officers and the registered agent address. These reports come with a fee, and missing the deadline can result in penalties or even administrative dissolution of your corporation.
Corporations also need to maintain certain formalities to preserve the liability protection that incorporation provides. That means holding annual shareholder and director meetings (or documenting written consents in lieu of meetings), keeping corporate minutes, maintaining a separation between personal and business finances, and filing required state and federal tax returns. Skipping these formalities can give a court reason to “pierce the corporate veil,” which means holding shareholders personally liable for the corporation’s debts.