Bill Gates. Larry Ellison. Michael Dell. What do these three men have in common? They are three of the richest men alive. They formed corporations that later became multi-billion dollar corporations. Their wealth was accumulated through hard work, skill, and luck. Today, the successful businessmen enjoy the finer things in life, computer-operated estates and tracts of land more expansive than some small countries.
Is that the kind of success you want? If so, you should take these necessary steps when forming a corporation.
Know your stuff
A corporation is simply a business organization that’s recognized by its operating state. If you’re a stockholder, then you are an owner. In addition to stockholders, the board of directors and the officers (CEO, CFO, etc) also characterize a corporation. Last, but certainly not least, the employees round out the corporation. If you’re still confused about the basic structure of corporations, there are hundreds of books on the market that gives you plenty of information about forming a corporation.
Appoint your people
It’s now time to start appointing your board of directors. The board of directors is very important to your corporation because they appoint the officers and issue stock. Usually, the shareholders pick the directors. Having at least one director is law in most states.
Pick a corporation name
Forming a corporationis not only a matter of picking the right people; it’s also about picking the right name. Gates has Microsoft. Ellison has Oracle. Dell has, um, Dell. What name have you bandied about? In order to find the right name, you need to contact your state. You cannot pick a name that’s already in use. This rule is in place to help you avoid confusion and lawsuits.
File for incorporation
Your next step is to file for incorporation. To do this, you need to file the necessary paperwork with your operating state. Each state has varying laws on incorporation, so be sure to read up. Paper filing should take place in your state’s capital.
When forming a corporation, you should ask for a lawyer’s legal consultation when you begin your corporation. While a lawyer is not required to help, an expert’s legal advice is always beneficial.
Risks vs. benefits
Every big decision has risks. The decision to create a corporation isn’t an exception. One of the biggest downsides of owning a corporation is the double taxation rule. When this happens, the incomes of both the stockholders and the corporation are taxed. A would-be entrepreneur must also have a certain degree of money to form a corporation. If this venture is a failure, you’ll risk losing everything.
On the flip side, a corporation is beneficial to its workers, implementing a solvent retirement and insurance plan. A corporation is unique because it doesn’t rely on the original owner for operation. In fact, the board of directors can oust the founding members of a corporation.
These are only the basics. If you really want to start a corporation, read! You should read
daily about the ins and outs of forming a successful corporation. Last but not least, you need to offer a product or service that’s in demand, or create something that will soon be in demand. If Bill Gates didn’t foresee a time in which computers were commonplace, where would he be now?
By Michelle Presbury