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Mancuso, Anthony. Incorporate your business : a legal guide to forming a corporation in your state / By Anthony Mancuso.—6th ed. p. cm. Includes index. Summary: “Explains the advantages, disadvantages and tax consequences of incorporation plus provides step- by-step guidance for incorporating in all 50 states. e 6th edition is updated to cover recent changes in the law, including state, federal and tax law changes”—Provided by publisher. ISBN-13: 978-1-4133-1388-8 (pbk.) ISBN-10: 1-4133-1388-4 (pbk.) ISBN-13: 978-1-4133-1493-9 (epub e-book) 1. Incorporation—United States—Popular works. 2. Corporation law—United States—Popular works. I. Title. KF1420.Z9M36 2011 346.73'06622—dc22 2010052790 Copyright © 2001, 2004, 2005, 2007, 2009, and 2011 Anthony Mancuso. All rights reserved. e NOLO trademark is registered in the U.S. Patent and Trademark O ce. Printed in the U.S.A. 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Acknowledgments anks to Diana Fitzpatrick for editing this edition of the book and to all the Noloids for their help in making this book a reality. About the Author Anthony Mancuso is a corporations and limited liability company expert. Tony graduated from Hastings College of Law in San Francisco, is an active member of the California State Bar, writes books and software in the elds of corporate and LLC law, and has studied advanced business taxation at Golden Gate University in San Francisco. He also has been a consultant for Silicon Valley EDA (Electronic Design Automation) and other technology companies. Currently, he is working at Google. He is the author of many Nolo books on forming and operating corporations (protmaking and nonprot) and limited liability companies. Among his current books are How to Form a Nonprot Corporation, Form Your Own Limited Liability Company, Your Limited Liability Company: An Operating Manual, e Corporate Records Handbook, and LLC or Corporation? His books have shown over a quarter of a million businesses and organizations how to form and operate a corporation or an LLC. He has lectured at Boalt School of Law on the UC Berkeley campus (Using the Law in Non-Traditional Settings) and at Stanford Law School (How to Form a Nonprot Corporation). He taught Saturday Morning Law School business formation and operation courses for several years at Nolo Press oces in Berkeley. He has also scripted and narrated several audio tapes and podcasts covering LLC and corporate formations and other legal areas for Nolo as well as e Company Corporation. He writes articles for and hosts the Nolo blog, LLC and Corporation Small Talk (www.llccorporationblog.com). He has given many recorded and live radio and TV presentations and interviews over the years covering business, securities, and tax law issues. His law and tax articles and interviews have appeared in e Wall Street Journal and eStreet.Com. Tony is a licensed helicopter pilot and has performed for years as a guitarist in various musical idioms. To access Tony’s LLC and corporation blogs and podcasts, plus links to his books and software, go to www.nolo.com, click on “About Nolo,” then “Nolo Authors,” then “Anthony Mancuso.” Table of Contents Your Legal Companion for Incorporating 1 Choosing the Right Legal Structure for Your Business e Different Ways of Doing Business 4 Comparing Business Entities 27 Nolo’s Small Business Resources 32 2 How Corporations Work Kinds of Corporations 36 Corporate Statutes 41 Corporate Filing Offices 43 Corporate Documents 43 Corporate Powers 45 Corporate People 46 Capitalization of the Corporation 63 Sale and Issuance of Stock 65 Stock Issuance and the Securities Laws 70 3 Understanding Corporate Taxes Federal Corporate Income Tax Treatment 90 Corporate Accounting Period and Tax Year 96 Tax Treatment of Employee Compensation and Benefits 97 Employee Equity Sharing Plans 101 Tax Concerns When Stock Is Sold 115 Tax Treatment When Incorporating an Existing Business 117 4 Seven Steps to Incorporation Step 1. Choose a Corporate Name 130 Step 2. Prepare and File Articles of Incorporation 138 Step 3. Set Up a CorporateRecords Book 145 Step 4. Prepare Your Bylaws 147 Step 5. Appoint Initial Corporate Directors 161 Step 6. Prepare Minutes of the First Board Meeting 162 Step 7. Issue Shares of Stock 177 5 After You Form Your Corporation Postincorporation Tasks 194 Tax and Employer Registration Requirements 199 Ongoing Corporate Meetings 201 6 Lawyers and Accountants Lawyers 206 How to Look Up the Law Yourself 209 Accountants and Tax Advisers 210 Appendixes A State Incorporation Resources 211 B How to Use the CD-ROM 215 Installing the Files Onto Your Computer 216 Using the Word Processing Files to Create Documents 217 Using Print-Only Files 218 Files on the CD-ROM 219 C Forms Included as Tear-Outs and on the CD-ROM 221 Forms for Incorporating Request for Reservation of Corporate Name Iowa Articles of Incorporation With Instructions Nebraska Articles of Incorporation With Instructions Cover Letter for Filing Articles Bylaws Incorporator’s Statement Minutes of First Meeting of Board of Directors [...]... structure for your business | 5 steps you may wish or be required to take— such as registering a fictitious business name if your business won’t use your personal name or registering for a business license or sales tax permit—but these steps are not necessary to legally establish your business Personal liability for business debts, liabilities, and taxes In this simplest form of small business legal... start out—you can change your legal and tax structure from one form to another during the life of your business However, there are tax consequences when you change your business entity, so you’ll want to consider that decision as carefully as your initial business entity choice The analysis we present here, which includes examples of businesses that choose each of these types of business structures, should... Incorporate on Your Computer 33 4 | incorporate your business T o make sure that forming a corporation is the best legal and tax approach for your business, this chapter compares the corporation to other small business legal structures, such as the sole proprietorship, the partnership, and the popular limited liability company A corporation, like a limited liability company, protects your. .. legal structure for your business is one of the most important decisions you’ll make when starting a business Often, business owners start with the simplest, least expensive legal form (the sole proprietor ship), then move on to a more complicated business structure as their businesses grow Other businesspeople pick the legal structure they like best from the start, and let their businesses grow into... informed client—and get the most for your money 2 | incorporate your business We know that any legal process can be challenging We hope this book, with its step-by-step and state-by-state approach to incorporation, will help you through the legal hoops and over the hurdles of incorporating your business Congratulations on taking your first steps toward success in your new enterprise! ● 1 C H A P T E... of your business In today’s volatile business world, this type of protection is more needed than ever You don’t want to be personally exposed in the event your business gets in trouble and can’t pay bills as they become due Forming a corporation can give you the peace of mind you need to keep going with your business in these turbulent economic times This book explains, in plain English, how to incorporate. .. Choosing the Right Legal Structure for Your Business The Different Ways of Doing Business 4 Sole Proprietorship 4 Partnership .7 The Limited Liability Company (LLC) 11 The Corporation 15 Comparing Business Entities 27 Nolo’s Small Business Resources 32 Starting and Running Your Business 32 Partnerships... proprietorship business Celia should include a Schedule C in her yearly federal 1040 individual tax return, showing the net profits (profits minus expenses) or losses of her sole proprietorship Celia is responsible for paying income taxes on profits, 6 | incorporate your business Businesses Co-Owned by Spouses In the past, a husband and wife who worked together in an unincorporated business and shared... for your business See Form Your Own Limited Liability Company, by Anthony Mancuso (Nolo), for instructions on how to form an LLC in each state, how to prepare an operating agreement, and how to handle all other LLC formation requirements You can also learn more about LLC formation procedures and fees for your state by visiting your state’s business filing office website To find the Web address of your. .. Another advantage of the corporate structure is that business owners who actually work in the business become employees This means that you, in your role as an employee, become eligible for reimbursement for medical expenses and up to $50,000 of group term life insurance paid for by your business These perks are not available to employees of unincorporated businesses (For further information on standard . 33 Incorporate on Your Computer 33 4 | INCORPORATE YOUR BUSINESS T o make sure that forming a corporation is the best legal and tax approach for your business, . STRUCTURE FOR YOUR BUSINESS | 5 steps you may wish or be required to take— such as registering a ctitious business name if your business won’t use your personal