As New Jersey continues to recover from all of its economic hardships, you may consider starting a new business. After weighing all of the pros and cons of each type of legal entity, you settled on a corporation. You more than likely chose this type of entity, at least in part, due to the significant protections for owners and shareholders when it comes to liability.
This protection also comes with the ability to purchase property, borrow and loan money and enter into contracts, among other things. On the other hand, it comes with taxation of the corporation itself and any dividends paid to shareholders, but you probably felt the pros outweighed the cons. Since forming this type of entity involves the most paperwork and regulation, it may help to have some idea of what you face.
It's a multi-step process
Before you can say that your corporation is official, you need to get through the following steps:
- Name: You may think this is the least of your worries, but consider that whatever name you choose sticks with you for years to come.
- Articles of Incorporation: This document actually forms your corporation. The articles must meet certain legal standards.
- Bylaws: This document outlines the basics of how the company will operate and who will fill what positions.
Once these documents are complete, you have formed the corporation. However, you also need to give some attention to the following additional documents:
- Employer Identification Number: This serves as your corporation's social security number and allows the corporation to pay taxes and open bank accounts.
- Tax status: You will need to understand the pros and cons of each choice.
- Permits and licenses: It would be a good idea to obtain any licenses and permits you need before opening your doors.
- Stock: Keeping track of all stock certificates issued falls on the corporation.
- Shareholders Agreement: At a minimum, these agreements outline how shareholders buy and sell the company's stock.
Many of these documents need to be in place in order to begin operations.
It's a complex process
This article only outlines the steps required in order to form a corporation. When you begin delving into fulfilling each of these requirements, you will more than likely discover that the process is more complex. Each of these documents must meet the requirements of your business and the law, which could give your new corporation a solid foundation upon which to grow. In order to help ensure that everything is done correctly, it may be to your benefit to seek the appropriate help.