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Corporate Requirements
Corporation requirements are the legal obligations one must meet to form and maintain a corporation. Such requirements may range from what information must be included in forms to how the company is to be run, and there will be requirements to meet so long as the corporation is in operation. Such extensive requirements are why some people choose to run limited liability companies (LLCs) or sole proprietorships instead, but others feel that the rewards of corporate status far outweigh the downsides and pursue corporate status nonetheless.
Corporation Formation Requirements The major requirement to forming a corporation is filing the Articles of Incorporation, which is a legal document that provides proof that your company exists and is authorized to operate in the state. A proper Articles of Incorporation document will include the following information: The corporation’s name. The corporation’s address. The corporation’s registered agent’s name and address. The purpose of the corporation. Stock information, which includes the amount, class, and possible value of the shares. Other information as required by state law, varying from state to state. There will also be a filing fee–usually $100 to $500–that is usually to be made payable to the Secretary of State.
Requirement to Conduct Meetings
A corporation is required to conduct annual meetings for corporate shareholders and periodic meetings for corporate directors. During an annual shareholders meeting, the shareholders vote on various matters such as electing directors, amending bylaws, approving mergers, or approving the sale of corporate assets. During a meeting of the directors, corporate officers are elected, approve salaries, issue stock, and authorize loan agreements.
Document All Meetings
In addition to the requirement to hold meetings, you are required to carefully document the business conducted at the meeting and the decisions made in the meeting. You must have a careful and detailed record of the meetings that are available for review. If your company is audited by a government agency or the corporate status is challenged, the minutes of these meetings can help maintain the corporate status.
File Separate Tax Returns
Corporations are required to file separate tax returns and pay corporate taxes on earnings. Even if you are the sole shareholder of the corporation, you must file a corporate tax return to maintain your corporate status. The corporation issues tax documents to shareholders to be used when they file their personal tax returns. However, filing corporate tax returns can be confusing. C-Corporations and S-Corporations are taxed differently.
Service Advantage
A corporation should use a double-entry book keeping system for its financial records. This form of bookkeeping ensures that all corporate financial transactions are accurately recorded and tracked. Therefore, any financial transaction of the corporation should be entered as both a debit and a credit.
