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Compare Corporation and LLC Formalities
Incorporating your business is the first step to formally organizing your company. Once your filing is recorded with the state office, you will have several formalities to address. Some of these depend on the type of entity you form, for example, corporations should issue stock to the shareholders and LLC’s should execute an operating agreement – more on these later. In order to maximize the benefits of being incorporated, creating the separate status of your business, from its inception is important to you. Some of these are “no brainer’s” and others are best practice. We will walk through the formal process of organizing a business and post-incorporation actions that will ensure that you create and maintain a separate legal entity.
When you are operating a business, whether you incorporate or not, you want to keep accurate records and maintain compliance with local, state and federal law at all times. Lets examine the important features of this business formality. 1800Company.com is a full-service business filings and compliance provider, we will ensure that you can start up and grow your business without having to go anywhere else.
Start Up Formalities
- Federal Employer Identification Number (EIN): An EIN Number from the IRS is your business’ tax identification number. This will be required by your bank to open up a business checking account. We can prepare your EIN application, or obtain your EIN number for you.
- Business Checking Account: Opening up a business checking account is probably the first step you should take. After all, the additional expenses you incur while performing the formalities related to your business should be deducted as necessary business expenses and recorded on your company books.
- Business Licensing and Permits: Every business should comply with local municipal laws, this is a very simple process where we create a package for your type of business according to your city, county and state’s law. There are a number of variables in order to understand exactly what applications and forms are necessary for your business – we can do all the thinking for you and deliver all of the applications and forms necessary for your business.
- Record Keeping and Accounting: Maintaining separate financial records and accounting for your business is required. Organizing your business from the start is best practice. Retaining an accountant that is right for you and choosing a financial system is something that all business owners should do as part of the organizational process of your company.
- Legal Advice and Agreements: Depending on the type of business you operate, you will want to seek some legal advice and create any agreements or contracts, liability release forms and/or disclaimers so that you protect yourself and your business.
Corporation Start Up Formalities
- Issue Corporate Stock: Part of the separate status between the corporation and those who own it, is to issue stock to the shareholders of the corporation. This is done by completing stock certificates (similar to writing a check) and giving them to the shareholder while recording the action in writing with your corporate records. This simple formality is critical and will strengthen your corporate veil – all corporations should issue stock during the organizational process.
- Form Corporate Bylaws: Corporations are governed by an internal set of bylaws. This document outlines how the corporation will be run and documents rights and powers of the contributing bodies, those being the shareholders, board of directors and corporate officers. Similar to an LLC operating agreement or partnership agreement, this document plays an essential role in governing the corporation.
- Hold Organizational Meetings: Corporations are the only entity type that is required by law to hold meetings. The first meeting of the board of directors and shareholders is part of the formal organizational process. In this meeting, officers are assigned their role, the fiscal year end date is set, bank account signers are granted authority to financial accounts and other initial actions are approved.
- Open Corporate Record Book: Maintaining corporate records is very important. Starting a corporate record book and maintaining proper documentation is a must for properly operating a corporation.
Limited Liability Start Up Formalities
- Assign LLC Interest: LLC’s, like corporations, are owned by members who are assigned interest in the company. This is a matter of a legal document and could be part of the operating agreement, or an amendment to the operating agreement. Performing this provides the members entitlement to controlling rights, profit and loss deductions and limited liability, among other important aspects of owning an LLC.
- Form an Operating Agreement: This is the heart of an LLC, how the company is run, how taxes are handled, who controls what and how much, how funds are distributed and an entire governing document for your company. This can be very complex, or simplified – either way, it is a mandatory element of owning an LLC.
Keeping it Legal
With any business, compliance is necessary. When you incorporate with 1800Company.com you have a small army of professional consultants who are there for you, every step of the way. We can assist with all of your organizational and operational compliance when your business is formed and as you grow it. We welcome questions, perform all application preparation and will liaison with the IRS or local government offices for you – business support is only a phone call away. 1-800-Company.