What is Incorporation?

November 4, 2013 | By | Reply More

youngmanthinkingFind the answers to frequently asked questions about incorporation from Active Filings, LLC:

Why Incorporate?

A well-incorporated and well-run company can limit the personal liability of its shareholders. Corporate assets may be at risk, but personal assets will generally be treated as separate. However, keep in mind that the Court does not automatically remove liability for criminal and negligent acts on the part of the company’s officers, directors and shareholders.

Incorporation can help limit your personal liability as a business owner. In general, creditors of your corporation must satisfy their claims by seizing the assets of the corporation rather than your personal assets. In contrast, as a sole proprietor or partner in a partnership you are financially responsible for all liabilities of the business, and your personal assets are subject to seizure or lien by creditors.

Other benefits of incorporation can include greater tax deductions for health insurance and medical expenses, lower payments for social security tax and Medicare tax, and greater opportunity to raise capital for the business through the issuance of stock.

How do I form a corporation or LLC in the state of my choice?

The formation of a corporation or LLC is not a difficult process, and in most cases, it can be accomplished quickly and efficiently by a professional incorporating service, such as ActiveFilings.com. As your agent, we will investigate the availability of your proposed corporate name and reserve it for you. Next, we prepare a Certificate of Incorporation. All state filing fees are paid through ActiveFilings.com to the appropriate state agencies.

What are Articles of Incorporation?

A Corporation’s “Articles of Incorporation” is the main filing document which begins the corporation’s existence under state law. Once filed, the corporation comes into existence.

The articles of incorporation declare the desire of an individual or group to become a corporation. It spells out certain minimum information about the corporation that is required by the laws of the state. It may also contain specific information about the corporation that needs to be made public record, like restrictions on the transfer of stock.

The level of complexity for a corporation’s Articles of Incorporation can range from very simple to extremely complex. Generally, most jurisdictions require Articles of incorporation to contain, at a minimum, information about the Corporate Name, the Registered Agent, and the Corporation’s business address. Requirements vary by state.

What information is required to prepare a Certificate of Incorporation?

In addition to the name of the corporation and the address, you need to provide the director(s) name(s), the company address where the corporation will be located, and the number of shares of stock that you want authorized. Using this information, ActiveFilings.com can prepare and file the necessary documents.

Do I need an attorney to form a corporation or LLC?

No. ActiveFilings.com provides all of the basic requirements for business incorporation and limited liability company (LLC) organization. You’ll also save many hundreds of dollars. However, an attorney can provide advice as your business grows, so we recommend that you at least begin to think about the qualities you’ll want in a legal advisor. ActiveFilings.com is always willing to work with your attorney, if you prefer.

Do I need a special ending on my corporation’s name? In most states, your corporation’s name must include an ending, such as “company”, “corporation”, “incorporated”, “limited”, “association”, “club”, “fund”, “syndicate”, “union” or the appropriate abbreviations (co., corp., inc., ltd., etc.).

What are Corporate Bylaws?

Bylaws are rules for the corporation that specify things such as the number of votes required to pass a matter put before the corporation, and the requirements to be met before a shareholder can sell his shares, among other things. Bylaws may not be changed without a majority of votes of the board of directors. Bylaws do not need to be filed with the State. They are created solely for the corporation and it’s shareholders.

Does it matter where (in which State) I incorporate?

Generally, you should incorporate in the State where your office is physically located. If you incorporate in another state such as Delaware, you may need to submit an application to qualify as a foreign corporation in the State where you are located. This tends to be more trouble than it is worth for a small business.

A number of years ago, there were some pretty motivating reasons why you might want to incorporate in States like Delaware and Nevada. However, times change and so do State laws. For companies that are privately owned (closely held), there are no substantive differences any more between the corporate laws of States. If you incorporate for the purpose of owning and operating a business, the general rule is that you should incorporate in the state where your main business office is located.

Can my Delaware corporation do business in my home state and other states besides Delaware?

Yes. In fact, nearly half of the corporations listed on the New York Stock Exchange are Delaware corporations. Many of these corporations conduct business throughout the US and abroad. They must, of course, conform to the laws of any jurisdiction they enter. Many states require that any foreign (out of state) corporation qualify to do business in their state. ActiveFilings.com can assist you in qualifying your corporation or LLC in any state you choose.

Must I file a D.B.A. (‘Doing Business As’)?

Individuals and unincorporated entities that regularly conduct business using an assumed name (often referred to as a “d.b.a.”) must file an assumed name certificate with the county clerk in each county in which business premises are maintained. If corporations, limited liability companies or limited partnerships (entities created by filing with the secretary of state) do business with a name that is different than the name set forth in the organizational documents, they must file assumed name certificates in the county or counties where the registered office and the principal office are located, and must also file with the secretary of state.

What is a Registered Agent?

A registered agent is a person designated to receive legal notices, services of process, and other official documents delivered to the corporation. All corporations must have a registered agent on file with the Secretary of State. The address of the registered agent must a physical address, not a post office box. The person designated to be the registered agent may be an employee, officer, director, or shareholder of the corporation, or he or she may not be affiliated at all with the corporation. Additionally, the registered agent must be available during normal business hours.

ActiveFilings.com provide registered agent services in every state. In addition to forming corporations and LLC’s in all 50 states, has a nationwide network of registered agents that can represent your corporation

Recommended Books on Incorporation:



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