How Does a Company Become a Corporation

Summary: Establishing a corporation is one way of expanding a business, though it is quite a difficult work. There are pros and cons to be considered, so much more the time-consuming processing that needs to be done.

If you want your corporation to really work out, be very careful and research a lot before making your decision.

Turning your company into a corporation is not as easy as your think it is.

Likewise, private companies who want to go and become a public is quite difficult, especially if they are so small and not growing fast enough, does not have enough profits, weak management, or in volatile industry.

Turning your company into a corporation has to be thought of, if you don’t want to suffer the consequences. Thus, see to it that you have experts or advisors to help you work this thing out. And once you’re at it, see to it that you and your team expertly manage the corporation to make a long and lasting one.

The Pros and Cons of Turning a Company into a Corporation

It really takes a wise CEO to turn a privately-owned company into a corporation, operating in the public market. Before making your company into a corporation, take note of the following pros and cons:

Pros

• Limited Liability
• Tax Advantages
• Enough source of capital
• Establishment of credibility
• Transferability of ownership

Cons

• Compliance of intricate requirements to the Securities and Exchange Commission (SEC)
• Pesky shareholders
• Double taxation
• Increased expenses
• Corporate formalities

Seven Steps to Turn your Company into a Corporation

To some, turning a company into a corporation is their means to attain success in their business. And if your company is all set to become a big-time corporation, try following these steps:

1. Have a Unique Corporate Name. Search for a corporate name for your business. Make sure that it will be unique and original to avoid trademark problems that might ensue in the future.

2. Have your corporation’s headquarters in your home state. It’s always cheaper and easier to process applications if you choose your home state as your headquarters or main office.

3. Choose a type of corporation. Identify what is the best type of corporation for your business: be it LLC, C corporation, or S corporation.

4. Name your corporate directors. Make sure that you can appoint directors to fill the key vacant positions before you file your Articles of Incorporation and By-Laws to the SEC.

5. Choose your kind of share. Corporations usually sell either common or preferred stock. Select the best and most suitable for your situation.

6. Have a Certificate of Corporation. This will prove that your incorporation is legal. You can obtain it from the local state office.

7. Process your Incorporation. This is usually the longer and more difficult part. But your lawyer can do this work for you. Incorporation is usually filed to a registered agent.