Rules for Incorporation

By Taunda Edwards
Rules for Incorporation

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Incorporating a business gives a business many advantages, such as the basis for a long-lasting business. Once a business becomes incorporated, the business can continue to operate whether a shareholder, executive manager or officer dies. A business that is incorporated also has the right to transfer ownership of the business by selling stocks in the corporation. Many business owners incorporate their business without a lawyer, which is fine. However, there are many rules and regulations that must be followed to complete the incorporation process.

Name of Corporation

Before a business can be incorporated, the name must be verified. This is done because no state allows a business to incorporate a name that is currently registered by another company. One fact to consider when incorporating a name in one state is that another state may have a company with the same business name. Although this does not prevent a business from incorporating, the business using the same name can run into other violations such as trademark infringement. It is a good idea to contact the U.S. Patent and Trademark Office to determine if a corporate business name has already been registered. All business names must be filed with the Secretary of State of the state in which a business is being incorporated.

Tax and Employment Identification Numbers

Once an appropriate business name has been chosen, the business must next apply for a tax identification number, also known as the federal employer identification number. This is a unique nine digit number that each corporation receives from the Internal Revenue Service. The purpose of the number is so the IRS can properly identify each business that is operating in the United States. The tax identification number is generally used to identify the corporation, and the employment identification number is used to report employment tax.

General Filing Requirements

Other requirements to incorporate a business in the United States include legal age of the filer, which is 18, and depending on the type of business bylaws may be necessary. The bylaws of a business detail or outline the management of operation the corporation has, as well as a listing of board members, stockholders, the company president, secretary, chief financial officer and other officers. In addition, a business must obtain a business license and pay an incorporation fee, which varies from state to state. After a business has been incorporated, each state requires a business to pay reporting fees each year. For instance, in California a $25 reporting fee must be made each year, but the fee is $125 in Nevada. The purpose of the business report is to allow business to give up-to-date information on the company, such as any new business directors and officers.

About the Author

Taunda Edwards began writing in 1997 and received her bachelor's degree in secondary education from Miami University of Ohio in 2004. In 2005 she pursued her writing career on a full-time basis. Her first novel was published by T.A.D.D. Writes publications. She was a 2006 "Moviemaker Magazine" feature.

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