If you have recently started a business, you more than likely went through the process of determining the best structure for your business. For those who have filed articles of incorporation with the appropriate state agencies, you may not know what your responsibilities are going forward. Keep in mind that there are various reporting requirements that vary by state. Business owners will have to make sure they comply with the various state requirements to keep their business in compliance.
There are various steps you should take immediately after incorporating your business to ensure you are ready to hire people, meet the legal requirements of incorporation, and start doing business.
If your business is physically located in one state, but you have incorporated in another state, the state of incorporation will require you to have a registered agent. It is important to check with the corporation division in individual states to determine whether you need another agent. A registered agent may also be required if your business is entirely Internet based since you will need to have a physical location to accept mail and notifications. In most cases, your local Secretary of State's office can help you to determine if this is a requirement in your state.
You will be required to publish a notice of incorporation if your business is incorporated in the following states:
Check with the Division of Corporations in your state to determine if additional steps will be required before you hire any employees.
Corporate bylaws are designed to lay out the duties and responsibilities of the company's board of directors, shareholders, and managers. This document will also include specific provisions, with information about voting rights; annual meetings; what constitutes a quorum at meetings; and specifics about the rights and responsibilities of the individual board members, managers, and shareholders of the company.
Shares of stock are issued by the corporation and recorded appropriately. A ledger must be maintained specifying how many total shares are issued by the corporation, how many shares are issued to each shareholder, and how many are being held by the corporation in case of future financing needs.
The corporation's initial board of directors' meeting should be held as soon as possible after being incorporated. Generally, this will be considered an organizational meeting and will be the first opportunity to conduct corporate business. Typically, this meeting will include adopting bylaws, electing officers of the corporation, and adopting banking resolutions, among other issues. Depending on the overall structure of the business, this may also serve as a shareholders' meeting, or a separate meeting may be held for shareholders after the fact.
Before opening a business bank account, you should apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). While not every bank will require this, many of the larger banks do. Check with your local bank if you do not wish to use an EIN; in some cases, you may be able to use your Social Security number. Once you have obtained this number, you will also need to have certain documents to open a business bank account. These documents may include your certificate of incorporation or articles of incorporation, depending on your state, and in some cases a corporate resolution may also be required.
It is important to determine whether you will need multiple bank accounts. In some cases, businesses may elect to have a bank account to deal with income while a separate account deals with payables and payroll issues. Business owners should work with an accountant or financial specialist to determine their specific needs.
One of the benefits of forming a corporation is the separation between your personal assets and your business assets. This is the same separation that occurs between your personal credit and your business credit. If you do not intend to apply for business credit based on your personal credit history, you may need to take steps to apply for business credit. In many cases, the bank where you have established your business bank accounts may be able to assist you with obtaining a business credit card. You may also wish to establish lines of credit or make credit arrangements with vendors who may be supplying any products or services that will be necessary for the successful operation of the corporation.
In nearly all cases, regardless of what type of business you are operating, you will need to obtain a business license or permit from the state where you are doing business. This is an important legal step and may require you to produce specific documents for the state. For example, you may need to provide documentation showing educational criteria for certain businesses or you may need to show local zoning permits, etc.
Whether a business is providing services or products, it is important to make sure that you have sufficient insurance. There are various types of business insurance that you should consider having to protect customers, employees, and your business. Some of these include the following types:
Meet with an insurance agent who works primarily with business policies to make sure you have the right coverage for your business.
Your business name, logo, and work product may need trademark protection. This is to ensure that another company does not attempt to use a similar name in a deceptive manner to disrupt your business. You should register your trademark, purchase the domain name that is associated with your business, and take any necessary steps to prevent your business name and other intellectual property from being used by others.
If you have not previously obtained an EIN number, you will need to take this step prior to hiring your first employee. Once this is done, and you have obtained your business permits and have your bank account, you may be ready to begin hiring your first employee. However, before you do, make sure you check with the state to determine requirements for maintaining unemployment compensation insurance, be sure you have a separate bank account for payroll taxes, and make sure you have all required business insurance. Next, you should draft all the required human resources documents including confidentiality agreements, employment contracts, and an employee handbook.
Corporations, like other businesses and individuals, are required to file the appropriate state and federal tax returns. Additionally, there may be additional annual financial reports that are required by the state where you have incorporated. Companies that have employees are required to file a quarterly tax report which shows payroll deductions; you will also need to make the appropriate quarterly payroll tax payments. If the corporation is run by one person, as a sole proprietorship, you will be responsible for filing an estimated quarterly tax report and making payments.
Corporations with multiple owners, shareholders, or investors may also be required to prepare other financial documents on a quarterly or annual basis. Typically, balance sheets, cash flow statements, and statements of shareholder equity may be required. Since there are numerous financial requirements, a business owner should seek the advice of a tax professional to ensure they are remaining in compliance. Keep in mind that a lack of compliance on tax and financial issues can have a negative impact on your business and may result in steep penalties and fines.
Regardless of where your business is incorporated, you are required to have at least one annual meeting. This meeting is where the usual business of the corporation is attended to and must be recorded appropriately. Typically, this means generating meeting minutes. It is important to understand that all corporate shareholders must be notified of the annual meeting and that any business, such as voting on board meetings, is announced in the notice. A notification should be sent to all shareholders in advance—no less than 10 days and no more than 60 days prior to the date of the meeting. Meeting notices must contain the date, time, and location of the meeting. Be sure to check the state requirements to determine how meeting minutes are to be filed or recorded, if there are requirements.
If any changes are made to your company, including changing the bylaws or articles of incorporation, you may need to file an amendment with the state in which you are registered. Regardless, there are annual reporting requirements that must be met. Failure to file the appropriate forms with the state or municipality in which you are doing business could result in fines or other penalties.
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