Forming a new corporation is often an exciting starting point for an entrepreneur or the next logical stage of expansion for an existing small business. Corporate entities are valuable, in no small part, because they are legally distinct from the investors and executives that help to create, financially support, and/or operate the business.
There are several different kinds of corporations, including nonprofit corporations, each of which has unique benefits for those involved with the company. The creation of these complex legal entities often requires months of planning. These are two of the most important steps that people need to consider early in the corporation formation process.
Create corporate bylaws and a strong business plan
The written documentation for a corporation’s operations is of the utmost importance. The corporate bylaws for the company will determine everything about how it operates and will also play a major role in what kinds of executives and investors the company can attract.
Therefore, it is very important to have bylaws that carefully explore the operations of the company after its establishment, as well as a business plan that discusses how the company will generate revenue and the goals for the next five and 10 years of its existence. The information included in the business plan and corporate bylaws will likely influence the articles of incorporation that the company files to become an officially-recognized corporation.
Establish a board of directors
Corporations need to have investors or other responsible parties who agree to assist with the management of the corporation in accordance with the business plan and established corporate bylaws. In some cases, the goal may be to bring in individuals with a background in growing successful business entities.
Other times, the primary objective may instead be to have a diverse board comprised of the primary investors who have helped turn the idea of the company into a functional corporation with their resources. In both cases, the board will have to hold regular meetings and will have a profound impact on the company’s future operations and success.
Creating a corporation either as a new business or an expansion of an existing one is a way for someone with resources or an excellent business idea to both protect themselves from liability and also turn their company concept into a functional organization.