In the Commonwealth of Massachusetts, it makes more sense to form a corporation than an LLC as the formation and annual filing fees are both lower. There is the added headache of having to submit certain annual filings, but these can be rather generic. As of this writing, the filing fee for a corporation is $250 while an LLC is $500. Both are subject to a $15 expedition fee regardless of payment method. Annually, a corporation must submit the annual report, which is $100 if filed online in a timely manner. An LLC has no annual reporting requirement but still requires an annual payment of $500.
Before we begin, I should be ABSOLUTELY CLEAR that I am not now, nor have I ever been, a lawyer. What follows is NOT TO BE CONSTRUED AS LEGAL ADVICE. I am sharing with you various resources and files that I found and/or made while incorporating Draughts & Ledgers, Ltd. Feel free to use these resources to generate official-looking documents, but PLEASE, get them checked out by a lawyer before taking any action on or with them.
These steps were taken following steps outlined on the Digital Media Law Project page on Forming a Corporation in Massachusetts. I have modified them as I followed the process and added supporting documents.
- Choose a business name for the corporation and check for availability. Your imagination is the limit! That, and checking that no other entities are using this or a substantially similar name. This can be done for free on the Secretary of State’s website. There are rules around what can and cannot be a legal name.
- Recruit and/or appoint a director or directors for the corporation. This can be yourself in all positions.
- Appoint a Registered Agent. This could be yourself, but could carry significant penalties or fees if any (legal) process was unable to be served during regular business hours at your designated business address. If your office is ever closed or vacant, it’s easier to appoint someone else to “always be home”. I have found that the most cost-effective is Registered Agent for Massachusetts at $49/year.
- File Articles of Incorporation with the State. You can do this yourself on the Secretary of State’s website. Most likely, you are a Domestic Profit Corporation. I suggest authorizing 275,000 shares of undesignated stock as this is the maximum allowable without additional fee. You don’t have to issue all of them or set a par value. I specified in Article V that the Bylaws would dictate limitations of stock transfer and added an extra indemnification clause in Article VI.Be sure to specify the Registered Agent you engaged in the appropriate spots. At a minimum, you must have a President, Secretary, and Treasurer as well as as a Director. You can serve in all of these positions.
- Create the corporation’s bylaws. These are not filed with the state but must be present at the designated address for your corporate documents. If you specified your Registered Agent, you’ll need to provide them with a copy. Once again, DMLP provides a great overview of these documents here. Here’s a handy fillable .PDF from Northwest Registered Agent.
- You’ll be presenting a variety of other organizational documents at the first Shareholder’s meeting.
- Resolutions of Incorporator. In which you adopt your Articles of Incorporation and Bylaws, then promptly resign. Here’s some language from upcouncel.com.
- Bill of Sale of Issued Stock. Good to have on hand. Info from Northwest Registered Agent here.
- Minutes of the First Meeting of the [Sole / Board of] Director(s). Here’s a handy fillable .PDF from Northwest Registered Agent for multiple Directors. And another for a Sole Director.
- Stock Certificates for issuance. Just Google “.pdf fillable stock certificate” or use this one from Northwest Registered Agent.
- The Corporate Record Book. This could be a physical book or online. Here’s a description of what this document does.
- Hold the First Shareholder’s meeting. Again, not filed with the state but must be on hand at the designated address for your corporate documents. You must record in minutes the initial organizational meeting to (1) appoint directors; (2) appoint corporate officers; (3) adopt the bylaws; (4) authorize the issuance of stock; (5) set the corporation’s accounting year (fiscal year); (6) adopt a stock certificate form; (7) designate a bank; and (8) select a corporate seal (optional but cool). Again, DMLP. Here’s a handy fillable .PDF from Northwest Registered Agent that can also serve as the minutes.
- Get an EIN from the IRS or you’re SOL. Since a corporation is a unique entity, you’ll need a distinct identifying number whenever you are dealing with tax-related matters. You CANNOT use your social security number. Get an EIN instantly, online, for free, directly from the IRS, here.
- File with your Local Authorities. This could be a business certificate or similarly named document that states that your corporation has registered in the local jurisdiction where it operates. Counter-intuitively, you need the Federal EIN first, which you can only get once you’ve incorporated with the State. This may only be necessary if your trade name (We Count Your Money) is significantly different from your business name (Draughts & Ledgers, Ltd). Since we operate with our business name, this filing was unnecessary.
- Open a Bank Account for your Corporation. Keeping your personal and business finances separate isn’t just a good idea, its fiduciary! Most banks will ask to see your Articles of Incorporation, your Bylaws, the minutes of the meeting establishing you as an authorized Officer of the corporation, your personal identification, the Resolution authorizing the corporation to open the bank account at their bank, the corporation’s EIN, and the local business license. In our case, our local bank recognized us as a regular customer and just needed the Articles and the EIN.
- Profit!
Congratulations! You’ve successfully started your own corporation! Just remember that even if you’re the sole Director and Officer of a corporation that you operate for your own business, you still need to make annual filings of the activities of your corporation. The main two are the annual Shareholder’s Meeting and the Board of Directors. You can find draft language once again from Northwest Registered Agent for the Shareholders and the Board. There are also draft Resolution forms further down on this summary page. Not useful if you’re the be-all, end-all of your corporation, but may be necessary as you grow.