- [Narrator] A corporation is a type
of formal business structure
that is more complicated than an LLC,
but offers benefits that LLCs do not.
Corporations are great
if you're looking to raise money from venture capital
or looking to list on a stock exchange.
Corporations are also able to more efficiently
carry money over between tax years.
Arkansas is home to six Fortune 500 companies.
Out of the largest employers in Arkansas,
62% of those are corporations, employing a combined total
of more than 93,000 people in the state.
If you are starting a business and not sure
which business structure is best for you,
check out our other video,
Choosing the Right Business Structure
for your Business, linked below.
There are two ways to form a corporation.
You can form one yourself,
or you can hire a service to do it for you.
In this video, we will look at both options
and help you decide how to go about forming
your own corporation.
(bright piano notes)
Remember, this video is not legal advice.
If you are unsure of whether your company
should be a corporation,
consult with an accountant or an attorney.
By forming a corporation on your own,
you can save yourself some money.
Let's start by looking at the steps
to form a corporation on your own.
One, choose and secure your corporation's name.
The name you select for your corporation
will establish its brand.
It's the first thing most people will learn
about your organization.
It's important to pick a name
that both aligns with your brand
and follows the rules of naming guidelines in Arkansas.
You'll need to check Arkansas' specific naming requirements,
but you should follow these general rules
when choosing a name.
Your name must contain the word corporation,
company, incorporated, limited,
or an abbreviation of one of these terms.
Your name cannot use the words, bank, trust,
trustee, credit union,
or other related words without approval.
Your name cannot include words that could confuse
your corporation with a government agency, such as FBI,
treasury, state department, et cetera.
The name must be distinct
from that of any other corporation in Arkansas.
For more information on what makes a name distinct
and Arkansas' specific naming requirements,
check out our other video,
How to Name your Business in Arkansas, linked below.
Once you have a name selected,
do a name search to make sure it's available in Arkansas.
After doing an Arkansas name search,
you'll want to do a domain search
to see if your name is available as a URL.
Even if you don't plan on making a website today,
you may want to secure the URL
so someone else doesn't take it.
Two, choose a registered agent.
You must appoint a registered agent
when you register your corporation in Arkansas.
The registered agent can be
an individual in the company, including yourself,
or you can hire a professional service
authorized to do business in Arkansas.
They will send and receive legal papers on your behalf.
These documents include official correspondence,
like legal summons and document filings,
which your registered agent will receive and forward to you.
Your registered agent will also help remind you
to file the necessary reports.
Failure to properly maintain your corporation
can result in fines and dissolution,
so this assistance is valuable.
Designating someone else to serve as a registered agent
for your corporation has its benefits.
To learn more about hiring a registered agent service
for your corporation, read our Should I Use
a Registered Agent Service? guide, linked below.
Three, hold an organizational meeting.
Before you officially file
the formation documents in step four,
you'll need to hold an organizational meeting
to complete the following tasks.
Create and approve bylaws, select your initial directors,
determine your share structure,
and execute an incorporator statement.
Let's break down each of these.
Create and approve bylaws.
Bylaws are the rules that determine how your organization
will be governed and run.
You can think about the bylaws
as a constitution for your corporation.
It makes the rules and priorities
clear for everyone involved.
A corporation's bylaws will supplement any rules
set forth by the federal government or the state.
In your bylaws, be sure to include
how the corporation will be governed,
including the role of directors and officers,
how meetings are held, voting procedures,
and how officers and directors are elected,
how records will be kept and managed,
how disputes will be handled,
how bylaws will be added and amended in the future,
the date of the annual shareholder meeting,
how to negotiate contracts,
fiduciary duties to the corporation,
such as acting in the best interest of the corporation,
and what constitutes a quorum for voting purposes.
Appoint initial directors.
You must appoint at least one director
who will oversee your Arkansas corporation
until the first shareholder meeting.
A corporate director is in charge of the adoption,
amendment and repeal of the operational bylaws,
as well as the election, supervision,
and removal of officers.
After forming the corporation,
the incorporators, or initial directors,
if named on the formation documents,
should call an organizational meeting.
During this initial meeting,
either the incorporators will elect the board of directors
or the initial directors will appoint the officers.
Choose a share structure and strategy.
A share of stock is the unit of ownership of a corporation.
Each share of stock represents a percentage
of ownership of the company.
For example,
if a corporation issues only one share of stock,
the shareholder or stock owner
within on 100% of the corporation.
Shares can be structured into classes,
each class, termed as a share class,
holds different rights and privileges.
You can have multiple classes
and each class can hold any number of shares.
The standard articles of incorporation form
issued by the Arkansas secretary of state
allows corporations to indicate whether they will issue
more than one authorized share class or series.
We recommend starting with a high number
of authorized shares.
Many attorneys suggest 10 million.
By starting with a high number,
you have the flexibility to issue shares as needed
without paying legal fees
to increase your initial authorized shares amount.
Create and execute an incorporator's statement.
The incorporators should sign an incorporator statement
with complete names and addresses of each initial director
and store it in the corporate records book.
This document names the initial directors
that will serve until the board of directors is elected
during the first shareholders meeting.
It should be stored with the rest of your corporate records.
Four, file articles of incorporation.
You will need to file the articles of incorporation
with the state of Arkansas.
Once the articles are approved,
you will have officially formed a corporation.
You can file online, by mail, or in person
with the Arkansas secretary of state.
Filing fees vary, so check out our page
linked below for more information.
The formation documents will cover
the basics of your corporation,
including your corporate name and principal address,
your registered agent's name and street address,
and the number of authorized shares
your corporation is allowed to issue.
As mentioned in the previous section,
Arkansas' standard articles of incorporation form
allows you to indicate if your corporation will issue
more than one authorized share class or series.
Five, get an EIN.
Lastly, you'll need to get
an Employer Identification Number, or EIN, from the IRS,
also known as a Federal Tax Identification Number.
Your EIN is like a Social Security number
for your corporation.
And EIN is how the IRS tracks your business
for tax purposes,
but it's also necessary to open a business bank account
and legally hire employees.
The good news is that EINs are free
and can be quickly obtained by visiting the irs.gov website.
For more information on EINs,
check out our other video linked below.
Now that you know all the steps
to forming a corporation on your own,
maybe you don't want to go through the process by yourself.
Let's take a look at the other way to form a corporation.
Hiring a professional service to file your forms
and act as your registered agent for the corporation
will cost you an additional 50 to $150.
However, there are several benefits to working with a pro.
A hired registered agent helps
with getting your reports filed on time,
helps you stay organized
by keeping your business mail separate,
and is available at all regular business hours
to accept official mail and legal papers
on your corporation's behalf.
A final and important additional benefit
to using a service is privacy.
A professional service will provide a level of privacy
by withholding your personal name
from the corporation's contact information.
There are many reasons why you might not want
your personal information easily accessible
and associated with your business.
Hiring a professional corporation formation service
is an easy way to accomplish this.
If you want to form a company that can issue stock,
raise money through investors,
or efficiently carry money over between tax years,
then a corporation is the right business structure for you.
Now, you know all the steps to form a corporation.
For a more detailed guide,
visit our site at howtostartanllc.com.
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If you have questions or encounter any roadblocks,
leave a comment below.
Good luck with starting your corporation!