How to Start a Corporation

Step 1: Choose a State and a Name

Most small businesses incorporate in the state where they'll actually operate, since operating in a different state than the one you're incorporated in means registering there too, as a foreign corporation, and paying fees in both states. Startups planning to raise venture capital often choose Delaware regardless of where they operate, since most investors are familiar with Delaware corporate law. Whichever state you pick, your corporation's name generally has to include a designator like "Corporation," "Incorporated," "Company," or an abbreviation such as "Corp." or "Inc.," and it has to be distinguishable from other names already on file with that state's filing agency.

Step 2: Appoint a Registered Agent

Every state requires a corporation to continuously maintain a registered agent, a person or company with a physical street address in the state who can accept legal documents and official state mail on the corporation's behalf. You, a co-founder, or a professional registered agent service can fill this role, as long as whoever serves keeps a real street address, not a P.O. box, in the state of incorporation. Your Articles of Incorporation have to name this registered agent and office.

Step 3: File Your Articles of Incorporation

File your Articles, or Certificate, of Incorporation with your state's filing agency, typically the Secretary of State or a Division of Corporations. The document generally asks for the corporation's name, its registered agent and office, the number of shares it's authorized to issue, and the name and address of its incorporator. State filing fees vary; Delaware charges $109 for a standard Certificate of Incorporation and Wyoming charges $100 for Articles of Incorporation, as two examples, and most states offer expedited processing for an added fee.

Step 4: Hold an Organizational Meeting

Once the state approves your filing, the incorporator, or the initial directors if the certificate named them, hold an organizational meeting, or sign a written consent in place of one, to adopt bylaws, elect the board of directors, appoint officers, and authorize and issue stock to the founders. This step is where the corporation's internal governance actually gets set up; skipping it is a common formality gap that can undermine liability protection later.

Step 5: Get an EIN and Open a Business Bank Account

Apply for an Employer Identification Number from the IRS once the state has approved your corporation; the application is free and available online. Most banks require an EIN, along with your approved Articles of Incorporation and corporate resolution naming authorized signers, to open a business checking account. Keeping business funds entirely separate from personal funds from day one supports the corporation's liability protection.

Step 6: Choose Your Tax Status

Every corporation is a C corporation by default under IRS rules, taxed on its own profit at a flat 21% federal rate, with shareholders taxed again on any dividends. A corporation that qualifies, generally no more than 100 shareholders, all individuals, certain trusts, or estates, and only one class of stock, can instead file Form 2553 to elect S corporation status, which passes income through to shareholders similarly to a partnership. This election has to be filed within set deadlines, so decide early if S status fits your plans.

Step 7: Handle Ongoing State Requirements

Most states require a corporation to file some form of annual or biennial report and pay a recurring fee or franchise tax to stay in good standing; Delaware charges an annual franchise tax with a report due March 1, while Wyoming charges an annual report license tax due on the anniversary month of formation, as two examples. Missing these deadlines can lead to penalties or the state administratively dissolving the corporation, so calendar them as soon as you're approved.

Costs Vary by State and by How Much You Need Done Quickly

Beyond the state filing fee, budget for a registered agent service if you don't want to list your own address publicly, and for expedited processing if you're on a deadline. Compare a specific state's fee schedule directly on its filing agency's website before you file, since fees and expedite options change.

Decide Early Whether You'll Need Outside Investment

If you plan to raise money from venture capital or issue employee stock options, factor that into your state and structure decision from the start, since a corporation's stock-based structure, and Delaware's corporate law in particular, is what most institutional investors expect. Converting or re-incorporating later is possible but adds cost and complexity.

Keep Formalities Going After You File

Forming the corporation is just the first step. Most states expect ongoing formalities, annual reports, registered agent maintenance, documented board and shareholder actions, to keep the corporation in good standing and to preserve the liability protection it's meant to provide.

A Formation Service Can Handle the Paperwork

If you'd rather not manage registered agent compliance and state deadlines yourself, a formation service can file your paperwork and act as your registered agent. Compare what's included, state fees are typically billed separately from the service fee, before choosing one.

This Isn't Legal or Tax Advice

Filing requirements, fees, and deadlines vary by state and change over time. Confirm current requirements directly with your state's filing agency, and talk to a business attorney or tax professional about your specific ownership and investment plans.