- [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.
North Carolina provides performance-based incentives
and other ways to reduce business costs,
making this an exceptional place to incorporate.
Of the ten largest companies in the state,
eight are corporations, and they employ
over 1.4 million people.
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.
(uplifting music)
Remember, this video is not legal advice.
If you're 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 North Carolina.
You'll need to check North Carolina'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 North Carolina.
For more information on what makes a name distinct,
as well as North Carolina's specific naming requirements,
check out our other video,
"How to Name Your Business in North Carolina", linked below.
Once you have a name selected,
do a name search to make sure
it's available in North Carolina.
After doing a North Carolina 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 North Carolina.
The registered agent can be an individual
in the company, including yourself,
or you can hire a professional service authorized
to do business in North Carolina.
They will send and receive legal papers on your behalf.
These documents include official correspondence,
like legal summons and documents 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 will 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'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 interests 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 North Carolina 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, 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 North Carolina Secretary of State allows corporations
to indicate if they will issue more
than one authorized share class or series.
If a corporation plans on issuing
more than common shares,
they must add an additional schedule
to their articles of incorporation.
We recommend starting with a high number
of authorized shares.
Many attorneys suggest ten 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 and 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 documents 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 North Carolina.
Once the articles are approved,
you will have officially formed a corporation.
You can upload a PDF version of the articles
of incorporation to the North Carolina Secretary
of State's website, or you can submit the form by mail
or in person.
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 allows
you to indicate if your corporation will issue
more than one authorized share class or series.
If your corporation plans on issuing
more than just common shares,
you must add an additional schedule
to your articles of incorporation.
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 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.