- [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.
Massachusetts has a very impressive
startup survival rate of 84%.
Not only is that remarkable,
but the top 15 largest companies in the state
are all corporations.
If you're 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 Massachusetts.
You'll need to check Massachusetts
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 Massachusetts.
For more information on what makes a name distinct
as well as Massachusetts specific naming requirements,
check out our other video,
how to name your business in Massachusetts, linked below.
Once you have a name selected, do a name search
to make sure it's available in Massachusetts.
After doing a Massachusetts 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 Massachusetts.
A registered agent is also referred to as a resident agent
in Massachusetts.
The registered agent can be an individual in the company,
including yourself,
or you can hire a professional service authorized
to do business in Massachusetts.
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 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 need to hold an organizational meeting
to complete the following tasks.
Create and approved bylaws,
select your initial directors,
determine your share structure
and execute an incorporator's statement.
Let's break down each of these.
Create and approved 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.
Your Massachusetts corporations organizational structure
must include at least one initial director
who will oversee your corporation
until the first shareholder meeting,
as well as a president, a treasurer and a secretary.
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 in to 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 organization forum
issued by the Massachusetts secretary of Commonwealth,
allows corporations to indicate
if they will issue more than one authorized share class.
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 an executed 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 organization.
You will need to file the articles of organization
with the state of Massachusetts.
Once the articles are approved,
you will have officially formed a corporation.
You can file online, by mail, by fax or in-person
with the Massachusetts secretary of Commonwealth.
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 organization forum
allows you to indicate
if your corporation will issue more than one
authorized share class.
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 benefits
to using a service is privacy.
A professional service will provide a level of privacy
by withholding your personal name
from the corporations 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.
Give the video a like if you found it useful
and subscribe if you'd like to see more.
If you have questions or encounter any roadblocks,
leave a comment below.
Good luck with starting your corporation.