Start a Corporation

There are many different types of corporations. In addition to your standard, for-profit stock corporation, below are a few of the most common corporation types:

• Professional corporation: State-licensed professions, like doctors and lawyers typically must form a professional corporation.

• Nonprofit corporation: Businesses that have a purpose other than profit (such as public, mutual or religious benefit) can form a nonprofit and may be able to qualify for tax-exempt status.

• Benefit corporation: Kind of a “light” nonprofit. Benefit corporations don’t qualify for tax-exempt status and can make a profit, but they have an educational, environmental or other socially beneficial purpose in addition to profit.

There are also private vs public corporations. Most corporations are private. Taking a corporation public (so that it can be listed on national stock exchanges) is a difficult and expensive journey, but it has the potential to pay off in a big way.

If you’ve heard the terms “S corp” or “C corp,” note that these aren’t actually kinds of business entities. These are different designations the IRS uses to classify how a business is taxed.

Corporations are owned by their shareholders and usually managed by a board of directors. The shareholders or the initial incorporators elect the directors. The directors then elect officers like a President, Vice President, CEO, CFO, Secretary, or Treasurer, all of whom have fiduciary duties to their shareholders, although a single person can also serve all of the roles in a corporation.

Shareholders have the right to vote in the corporate meetings because of the shares they own for investing their money in the corporation, but the votes of most individual shareholders usually have very little power and influence in publicly-traded corporations because of the vast number of corporate shares issued and owned. Private corporations, however, typically have only a few shareholders, and the corporation’s founder usually holds 51% of the shares to maintain control of the company.

By default, corporations are classified by the IRS as C corporations and taxed separately from their owners, which results in the so-called “double tax”—probably the least popular feature of the corporate business structure. The double tax is an informal term for how C corporations pay taxes on their profits before distributing those profits to shareholders. The shareholders then pay taxes on that money again as personal investment income.

Qualifying corporations, however, can elect to get taxed as S corporations (an option that is also available for LLCs). With the S corp tax election, a corporation’s profits pass through the company, get divided up among its shareholders, and get taxed only once as the shareholders’ investment income.

A corporate resolution is an internal record showing the corporation’s approval of a major business decision. For example, if your corporation enters into a contract or buys property, this action should be voted on, approved and recorded in the corporate record book. While resolutions are internal, they can be audited by the IRS or state agencies, so it’s important to maintain proper records.

At Northwest we offer a variety of free resolution templates and other free Corporate Forms.

Corporate officers conduct the day-to-day business of a corporation and put the actions and policies established by the board of directors into action. Below are the most common corporate officer positions:

• CEO or President: This is the person in charge, and they oversee the daily operations of the company. They are also responsible for delegating tasks to other officers and even employees. They can be responsible for signing important documents such as major contracts, legal documents, and stock certificates.

• Treasurer or Chief Financial Officer: This person is essentially in charge of funds within the business. If you operate a smaller corporation, then this person deals with all financial aspects including payroll and billing. In a larger corporation, the CFO would do more oversight of financial operations within the company.

• Secretary: The secretary of your business keeps corporate records and prepares minutes of the board meetings as well as shareholder meetings.

Around $100 on average. States set their own incorporation fees. Most states have a flat base fee ranging from $45 (Arkansas online filings) to $300 (Texas). However, some jurisdictions (DC, DE, MA, MI, MO, NE, OH, OK, RI, and VA) have a fee scale that depends on factors such as number of shares or authorized capital. In DC, for instance, filing fees range between $220 and $1650, depending on the value of authorized capital.

You may also have to file an initial report and business license application upon incorporation which can significantly increase costs. In Connecticut, the filing fee is $250, but the initial report requirement brings that up to $400. In Nevada, articles are only $75—but the mandatory business license and annual report bring the total up nearly tenfold to $725.

At Northwest, we can form your corporation for just $39 plus state fees, a total that includes one year of registered agent service.

For board members and officer, fiduciary duties are obligations to act in ways that support the corporation and shareholders. Generally, fiduciary duties include:

• Duty of Care: This legal principle states that directors and officers must act in a reasonably prudent manner. Violations generally requires gross negligence. A careless business decision that results in a loss of profits is not typically a violation.
• Duty of Loyalty: This duty requires that directors and officers act on behalf of the corporation without personal economic conflicts. A classic violation of this duty is insider trading.
• Duty of Good Faith: Good faith means that directors and officers must act in conscious regard to their fiduciary responsibilities. It includes advancing corporation and shareholder interests, not violating the law, conducting business honestly, and fulfilling all duties.

Board members or officers who breach duties can be sued for damages or even face criminal charges. Two major kinds of breaches include:

• Corporate Nonfeasance: The failure to act when under the obligation to do so.

• Corporate Malfeasance: When a director or officer engages in a wrongful or illegal act.

An incorporator signs and submits the articles that legally create your corporation. Incorporators don’t have to be anyone in your corporation—just someone you authorize to file your articles.

Because incorporators typically have to provide personal information (including address) hiring an incorporation service can help reduce excessive personal information on your articles. When you hire Northwest, we’ll be your incorporators.

• You want a free business address you can use throughout your public filings, instead of always listing your personal address.

• You need a registered agent, corporate bylaws, business address and mail scanning—all of which is included with our incorporation service.

• You want fast, expert service without extra fees.

• You have a lot of business questions our Corporate Guides® can answer for you.

• You’re tired of companies selling your data.

• You want to spread out payments instead of paying steep filing fees all upfront.

• You want to focus on your business, not filing paperwork.

• You want to protect your brand as you build it.

Whatever your reasons are, Northwest is here to help you start your corporation the right way.

Yes! As your registered agent, we accept Amazon Verification Cards at any of the addresses where we own offices (CA, DE, FL, IL, ID, MT, NY, TX, WA, or WY). We’ll scan it like regular mail. Unfortunately, we can not act as your return address. We can only accept regular paper mail, not large packages, such as pool tables, winter jackets, or futons, even if we wish we could.

Sadly, no. Google’s terms of service requires your verification postcard to be sent to the physical address you are doing business at.