Incorporation offers legal separation from its owners and liability protection. It also allows for easier access to capital and may signal a higher level of reliability to the external market. Incorporating a business, however, comes with a lengthy application process, filing fees and ongoing maintenance. To ensure that a corporation is set up correctly, it is best to work with a lawyer and an accountant.
To form a corporation, first you need to draft your Articles of Incorporation. This document should include a statement of purpose, the number of shares you plan to issue and the par value for each share. It should also indicate whether you plan to grant your shareholders preemptive rights to treasury shares that have not yet been issued. You should also appoint a registered agent and draft corporate bylaws.
Once your articles are filed, you will need to hold an organization meeting to adopt them and elect board members. It is also a good idea to prepare a shareholders’ agreement, which is an optional document that stipulates how the company will be run.
The day-to-day operations of a corporation are usually managed by a committee selected by the shareholders. This committee can either be a single board of directors or, more commonly, a group of directors. The structure also makes it easy to transfer ownership, as shareholders can sell or buy shares of the corporation. This flexibility can make it easier to attract employees and promote growth. Additionally, corporations can have a perpetual existence, which can provide continuity and stability.