Incorporation is word that is both exciting and intimidating for entrepreneurs.
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Transitioning a small business to a corporate business structure opens up a whole new world of possibilities. But at the same time, the incorporation process sounds complicated, time-consuming and costly.
There are many reasons why a business might choose to incorporate. Corporations are legal entities so owners receive a layer of liability protection and tax advantages that aren't available to a sole proprietorship or partnership. Incorporation is also a major step toward attracting the attention of serious investors. Although corporations require more administration than sole proprietorships, the thing that scares most business owners away is the incorporation process itself.
It's not unusual for companies to hire an attorney or accountant to navigate the incorporation process for them. However, many other business owners elect to handle the incorporation process without outside assistance. An incorporation kit can be a valuable resource for DIY incorporation. Whether you decide to purchase an incorporation kit or create one from scratch, here are a few of the items your kit should include.
- State Guidelines. Incorporation is regulated on a state-by-state basis. The rules that govern corporate formation procedures may be slightly different in another. That means your incorporation kit needs to be tailored to your state's specific incorporation process and state-specific guidelines.
- Articles Of Incorporation. Articles of Incorporation (or the Certificate of Incorporation) are the seminal document of the incorporation process. Your company's Articles of Incorporation dictate the rules that will be applied to the governance of your corporation, so your kit needs to include resources to help you create a document that meets state approval requirements.
- Corporate Bylaws. Corporate bylaws describe the corporation's operating procedures. Bylaws outline board of director elections, shareholder meetings and other operating procedures that should be addressed in the bylaws template that is included in the incorporation kit.
- Minutes Template. Once the corporation has been established, you are responsible for maintaining official corporate records. Meeting minutes feature prominently in the corporate record and incorporation kits usually include a minutes template or other resources to get you started.
- Stock Transfer Ledger. You will also need to make sure your kit contains a customizable stock transfer ledger that will serve as an official record of every stock transaction made on behalf of the corporation.
- Corporate Seal. Many new corporations overlook the need for a corporate seal – a stamp that embosses official corporate documents. Incorporation kits sometimes contain a generic seal that you can use until you get around to having a custom seal made for the corporation.