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What Is A Corporation?
This post is the third in a series of three which will explore the differences between a sole proprietorship, an LLC and a corporation.
The idea of forming your own corporation may sound like an intimidating process, but if you’re looking for a business option with low liability and partners to share responsibilities with, it may be the right choice for your small business.
A corporation is a legal entity that is separate from its shareholders. This means that any debts acquired by the business can't be transferred to the shareholders who own parts of the corporation. Also, corporations have an easier time generating capital through the sale of stock in their business.
While these are attractive elements of a corporation, there are also some drawbacks. Corporations take a lot of time and money to start, and they also get hit the hardest when it comes to taxes. Sometimes, corporations can be taxed twice: once when the company makes a profit, and a second time when the profits are paid to the shareholders.
If you think a corporation is the right choice for your small business, here are some of the key steps you need to take:
- Choose a name. Search the business database to make sure the name you want isn’t already taken. You can pay $25 to reserve your business name.
File your corporation. The Georgia Secretary of State website offers a step-by-step guide to filing for a corporation online.
Appoint initial corporate directors. The directors of your corporation will be some of the most important parts of your business. They will work alongside the officers and shareholders to keep the business running smoothly.
Have your first board of directors meeting. This will lay the foundation for the way you would like to conduct business in the future.
Issue stock. The shareholders in your business will also be the stockholders, and will be a vital part of the corporation.
Comply with federal and state tax requirements. You can get your federal Employer Identification Number (EIN) on the IRS website.
Becoming incorporated requires time, money and a high level of dedication. For more information on the details of what a corporation is, check out the Secretary of State’s legal entity comparison document and stay current on the latest Georgia corporation news. If you want to review the different options for your small business, visit our previous blogs about the details of sole proprietorships and how to start an LLC.
About the Author
A Georgia native, Rachael Wheeler works as a Web Support Specialist for GeorgiaGov. She writes about a variety of current topics relevant to the Georgia government.