How Do You Form a Corporation?

Forming a Corporation

• A corporation is a legal business entity that’s separate from its owners.
• A C-corp is a traditional corporation that pays corporate income tax. Large, publicly traded companies are usually structured as C-corps.
• When you form a corporation, you will need to create corporate bylaws. Bylaws set forth the rights and responsibilities of shareholders, directors, and officers.

Types of Corporations

• There are two main types of corporations: C-corps and S-corps.
• C-corps pay corporate income tax, whereas S-corps pass profits/losses to shareholders’ returns.

Setting Up a Corporation

• To form a corporation, file formation documents and set up a board of directors.
• Consider where it will be located and who will oversee it.
• Get guidance from your state on specifics.

Corporate Governance

• Corporate governance refers to the system directing and controlling the corporation through the board of directors, officers, and shareholders.

Life of a Corporation

• The life of a corporation lasts until a change in its charter or its purpose ends.
• Assets will be sold to pay off debt first, then shareholders get whatever remains.

Conclusion

• A corporation is a legal business entity separate from owners.
• A corporation has its own rights/liabilities separate from its owners.