The most common type of business structure, corporations offer owners a degree of protection from personal liability. They are legally separate entities that can enter into contracts, sue and be sued, hire employees, own property and pay taxes. Creating a corporation requires a business to file articles of incorporation with the state where it will be doing business. The process is complex and can be time consuming. To avoid errors, it’s best to have an attorney or tax professional guide you through the process.
After a corporation is created it must develop corporate bylaws that define how the company is run. The bylaws supplement the state corporation code with details such as meeting procedures, ownership documentation and other logistics. Having the bylaws in place helps minimize legal and accounting challenges that may arise down the road.
A corporation must also set up its capital stock and determine the number of shares to be issued. It must register with its federal and state governments to get an employer identification number (EIN) and a tax ID number. This is important to allow for accurate recordkeeping and to enable the company to open bank accounts and apply for credit. The corporation must also obtain licenses and permits to operate its business. In addition, it must abide by laws that require the corporation to disclose its financial information publicly. A new report from the David Suzuki Foundation well-being economies team recommends major changes to Canada’s business corporation act to ensure that large companies prioritize people and planet over profit. It calls for corporations to establish a purpose statement and extend the fiduciary duty of directors and officers to include consideration of nonshareholder interests, such as employees and communities.