Forming a corporation can bring many benefits to your business and to you as a business owner. But before moving ahead, you might want to discuss your full options for business structure with a lawyer.
Your attorney can discuss the taxation, personal liability and debt implications of any structure you may choose. An experienced attorney can be the difference between a successful incorporation and a fiasco.
How to Form a Corporation
A corporation is a separate legal entity from its owners; meaning it can make a profit, be taxed, and held legally liable. Corporations have rights and responsibilities under Arkansas law and must file annual tax returns. When you turn your business into a corporation, it will survive your passing and the transfer of shares to different owners. As a separate legal entity, the corporation may become the subject of a lawsuit and can incur debt. An attorney can help you determine which type of corporation is best for your growing business.
If you want to change the legal structure of your business, you have other options. You may form an LLP (limited liability partnership), an LLC (limited liability company), C or S Corporation, Nonprofit, or one of the many other common business structures. Not every entity provides liability protection or the possibility of reduced self-employment tax. If you desire a high level of autonomy in your business, a Sole Proprietorship may be of interest. You will have the advantage of being the sole proprietor when it comes to disturbing company funds, but you also have a disadvantage of being personally responsible for every business debt and obligation. Conversely, an LLC provides limited liability protection from business obligations and debts but can be costly to form if capital is not already acquired.
You will want to make your selection wisely and choose the structure that most effectively coordinates with your business’ needs. Each business form comes with different tax consequences depending on the type of legal structure. Your attorney can help you weigh the respective pros and cons given the objectives of your business.
Required Information in Arkansas
To form a corporation, a business owner needs to file proper paperwork to create Articles of Incorporation. The articles are distinct from the company by-laws, which detail how the company is managed and operates. The incorporation forms request particular information that covers some basic ground, specifically:
• Name of the Corporation
• Primary purpose of Corporation (nature of the business)
• Name of the registered agent
• Street address of the Corporations registered office
• Business duration
• Name, signature, and address of each incorporator
• Names and roles of directors
• Quantity of authorized shares or stock
• Classes of stock (common or preferred)
There are specific rules about each of these items, such as who qualifies to be a registered agent. To incorporate in Arkansas, you must have an individual or company that resides in this state to act as the agent.
Your business name should be unique, so it is essential to perform a preliminary name search. Each of your directors should have their roles in the corporation clearly identified on the forms. A skilled and experienced attorney can help you navigate these finer details when it comes to creating and building your corporation.
Discuss Your Options with an Attorney
Your lawyer can help you to make sure that your incorporation details accurately reflect the realities and goals for your business. To discuss your business and future corporation with a legal advisor, contact Estate Planners of Arkansas P.A. today at 501-414-8965.