Forming a Company
So, at this point it was time to start forming our company. There are several types of corporate structures you can choose, including Sole Proprietorship, Partnerships, Limited Liability Companies, S Corporation and C Corporation. After a discussion with our accountant, we chose to become an S Corporation because it provided the tax structure of an LLC with a little more liability protection.
Some people use an attorney to set up the company, but we elected to do it ourselves. I used books and information I found on the State of Ohio website to find out what I needed to do. I used a book from Nolo. The newest edition of the book is called “Incorporate Your Business: A Step-by-Step Guide to Forming a Corporation in Any State.” You can purchase it from Amazon here. The State of Ohio website was also extremely helpful.
Selecting a Name
Selecting a name for your company is a bit of a challenge. Choose something that sounds professional. We chose a name, then we had to go to the Secretary of States’ website to find out if the name was available. The name we chose was available. I reserved the name for a small fee.
Registered Agent
Then we had to find and assign a registered agent. This is the agent who is responsible for receiving things like court documents. The agent must be available during regular business hours. When we started out, I used a service for this, and the service charged a yearly fee. As we grew and we opened an office, I listed the registered agent as our office. I really did not want important documents sent to one of our franchise locations in case I was not there, and it was lost.
File Articles of Incorporation
The next step was to file Articles of Incorporation with the state and develop the bylaws of the corporation. Filing the Articles of Incorporation was simply sending in a form with the chosen corporate name and a fee. I created the bylaws using a template from the book I had purchased (listed above). These documents must be kept in a Corporate Record Book which I made myself with a notebook and some dividers.
Hold Your First “Meeting”
Now it was time to hold the first “Board of Directors Meeting,” elect us as officers and issue ourselves shares of stock. I had to create a notice of the meeting and record minutes, as these documents must be included in the corporate record book. I just followed the templates from my book and created them. Our corporate structure required us to have yearly “meetings” to elect officers. We also had a meeting to record important decisions such as obtaining business loans. It is important that you know and abide by the requirements of your corporate structure, or you could lose the liability protection it provides.
Apply for an EIN
I then filed for an Employer Identification Number and filed the forms with the state to elect S Corporation tax status. I now had everything I needed to open a bank account for the company when we were ready.
This does not include everything we did in forming the company; these are just the main things that I remember. If I had used an attorney, like I did when we formed our second company, it would have been easier because they would have given guidance and created the documents for me. But this was a great learning experience, and I made certain that I completed everything I needed to do. I double checked things with my accountant as I went through the steps, I read a couple of how-to books on the subject, and everything turned out fine.
Now that we were bona-fide owners of a corporation, it was time to start searching for a location!
Key Insights:
You do not necessarily have to have an attorney to set up your company if you do enough research. However, I would recommend at least discussing it with an attorney and getting the advice of an accountant. If you have the funds, I would just let the attorney do it for you.
Up Next:
The search for a location begins!