- [Instructor] 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.
Not only does Ohio rank in the top 20 states
for having a low cost of living,
but startups usually enjoy a survival rate of 79%.
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.
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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 Ohio.
You'll need to check Ohio's 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 Ohio.
For more information on what makes the name distinct,
as well as Ohio's specific naming requirements,
check out our other video,
How to Name your Business in Ohio, linked below.
Once you have a name selected,
do a name search to make sure it's available in Ohio.
After doing an Ohio 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 Ohio,
a registered agent is also referred to
as a statutory agent in Ohio.
The registered agent can be
an individual in the company, including yourself,
or you can hire a professional service
authorized to do business in Ohio.
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 would 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 disillusion
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 meet the 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's 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 Ohio 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 a stock owner,
would then own 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 Ohio Secretary of State
allows corporations to choose one share class,
common stock or preferred stock.
If a corporation needs a multiple share class structure,
they must add an attachment
to their articles of incorporation.
Common stock gets its shareholders voting rights
whereas preferred stock does not.
When it comes to company assets,
preferred stockholders are paid before common stockholders.
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's 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 the articles of incorporation.
You will need to file the articles of incorporation
with the State of Ohio.
Once the articles are approved,
you'll have officially formed a corporation.
You can file online or by mail
with the Ohio 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,
the standard Articles of Incorporation form
can only be used to start a corporation
with one share class, common stock or preferred stock.
If a corporation needs a multiple share class structure,
they must add an attachment
to their Articles of Incorporation.
Remember that common stock grants
the shareholders voting rights,
while preferred stock does not.
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.
An 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 howtostartanllc.com.
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If you have questions or encounter any roadblocks,
leave a comment below.
Good luck with starting your corporation!