Registering a corporation does not have to be an overwhelming and hectic process. With proper planning, the process of forming a corporation can be extremely manageable. Below is a 10 step guide to the legal formation of a corporation and contains some of the essential factors necessary to consider when forming a corporate entity.
1. Decide on an Appropriate Corporate Name
After you make the decision to start your own business, one of the first things to consider is what you will name your corporation.
If you are registering a business in New York, your business name should distinctively stand out from the already existing documented names. If it does not, your name may be rejected when you attempt to register it (and might get canceled later down the line). You can call the New York Department of State – Division of Corporations to have them check the availability of your name or use the online database to check for yourself. Additionally, if you are not ready to register your corporation yet, but want to make sure no one takes your name in the meantime, you can have a name reserved for $20 for a maximum of 60 days by filing an application via mail to reserve your name.
Additionally, more of a technical requirement, in New York State, qualifying names should contain a designation indicating its form such as “Limited,” “Incorporation,” “Incorporated,” or an abbreviation of such. (Inc. or Ltd.).
While I won’t go into this too much for this article, you should also consider intellectual property rights, specifically whether your name infringes on the trademark rights of another upon registration. Making sure your name is cleared by a trademark search might be a very good investment to make – as it can come back to haunt you later down the line.
2. Draft and File a Certificate of Incorporation
Filing a Certificate of Incorporation with the NY Department of State marks the legal creation of your corporation. It must contain the corporate name and county of location of the central office, the street address, sum of shares the company is sanctioned to issue, the name and address of the incorporator. There are other provisions that can be included - but are more optional than required. The NY Department of State offers a free template that can be used, which contains the bare minimums of what you need to be included. The principal charge for filing the certificate is $125.
3. Take on an Agent
In this case, it is mandatory that every corporation in New York engages the New York Department of State as its legal agent. It asserts and forwards legal papers on behalf of the company in case of when the corporation is served.
4. Come up with a Corporate Records System
Maintain all of your corporation's vital information in a record book, kept at your main/head office. New York requires corporations to keep full and accurate books and records of account, including minute meetings, names and addresses of shareholders and the number and class of shares held by each. Doing so ensures you are taking care of one of the important corporate formalities that are required to ensure your corporation is running properly.
5. Formulate Corporate Bylaws
This is a document stating the fundamental rules governing the corporation. These are essential guidelines for the smooth operation of the firm and also act as legal proof and as an assessment tool while dealing with third parties.
6. Nomination of the Board of Directors
This is normally done by the incorporator. He/she fills an “Incorporator’s Statement” which contains the names and addresses of the appointed board members, whose copy should be retained in the Corporate Records Book. The appointees usually serve until the first annual general meeting of the shareholders is convened.
7. Convene the First Meeting of the Board of Directors
During the meeting of the board of directors, at least for the initial meeting, the following is usually conducted:
- Appointment of corporate officers;
- Approval of the issuance of stock shares;
- Deliberation on a corporate bank;
- Setting of the fiscal year; and
- Adoption of an official stock certificate form and corporate seal.
8. Handing out of Stock
The available stock is issued to each shareholder and a record of each shareholder’s contact details is kept in the corporation’s stock transfer ledger. Stock certificates may be issued to the shareholders.
9. Act by New York Biennial Statement Requirements
Every business engaging in commercial activities in New York is required to file a Biennial Statement with the Department of State every year. There is a charge of $9 for the service.
10. Act by other tax and regulatory requirements
Every corporation should abide by additional tax and prevailing requirements in their area of operation.
These tax and regulatory requirements may include:
- S corporation filing (where applicable).
- Federal Employer Identification Number (EIN) registration, which may be acquired online by submitting a free online application on IRS website.
- New York state taxes and pertinent report filing.
- Business Permits and Licenses – relevant authorities specify them.
There are certain rights and responsibilities involved in forming a corporation. Although a lawyer isn't required when filing for your certificate for incorporation, the New York State Division of Corporations "recommends a lawyer" to assist you through the process. If you need more information on the logistics of a corporation or its formation in New York, contact Cordero Law LLC.
Additionally, for more information on forming a business in New York, feel free to check out our Free Business Toolkit for some essential "tools" for forming and maintaining a business. New tools will be added periodically so be sure to check back!
Julian Cordero is an Attorney, Business Strategist, and Music Producer. Oh and he blogs too! Julian is licensed to practice law in New York and is the Managing Attorney of Cordero Law LLC, a New York City based law firm focusing on Business Law, Entertainment Law, and Intellectual Property Law.