A corporation is a business that the law treats as a legal entity separate from its owners (also called shareholders). This type of business is often chosen by entrepreneurs who wish to have more flexibility in transferring ownership and perpetuating the business for the long term. It also offers more protection against personal liability than other business entity types.
There are several steps in incorporating, including filing articles of incorporation with your state. Your attorney and tax advisor can help you determine if this is the right structure for your business and guide you through the process.
Once you are incorporated, it is important to establish corporate bylaws that define how meetings are called to order, how voting is used to make decisions and how ownership is documented. These documents act as the corporation’s internal rule book, and they should be filed with the state where you plan to operate.
Corporations are often taxed differently than individuals, depending on the size of your business and the type of corporation you create. You can find detailed tax information for each type of corporation on the IRS website.
While corporations can be created in any state or country, they are often registered in states considered to be pro-business or in overseas jurisdictions with favorable tax rules. There are many reasons why businesses choose to incorporate, but the main benefits include limited personal liability and easier access to capital.