Incorporating a Company in the US

What does the incorporation process entail?

The incorporation is the process to form a business entity in the United States. The founders will create a new entity to separate the liability from them as individuals. Protecting personal assets, and giving credibility to the enterprise are several value adds to incorporate in the United States.

The meaning of a par value Par value is the minimum issue price for a share of stock. Most founders who incorporate a Delaware C Corp to raise venture capital prefer to choose low par value since it has an effect on the annual franchise fee amount due for Delaware corporations. Wyoming companies don’t have to pay a franchise fee.

To calculate the franchise fee for your corporation in Delaware, you can use one of the following two methods that are detailed below (information is available at https://corp.delaware.gov/frtaxcalc/). Use the method that results in the lesser fee.

  • Authorized Shares Method: The Annual Franchise Fee assessment is based on the number of authorized shares of the company. The minimum fee is $175.00.
  • Calculation:
  • 5,000 shares or less (minimum tax): $175.00
  • 5,001-10,000 shares: $250.00
  • Each additional 10,000 shares or portion thereof add $85.00
  • Maximum annual tax is $200,000.00

    Example: Although the amount is at the founders’ discretion, we recommend new corporations initially authorize 10,000,000 shares to be easily divided among founders, sold to investors, and/or offered to employees. To avoid legal difficulties, we also recommend keeping the total value of all shares under $100.

    Placing a very low initial value on your stock, like $0.00001, allows you to create a very large amount of shares, which is attractive to shareholders. However, if you authorize a lot of shares (e.g. 10,000,000), the Authorized Shares Method will result in a high fee, so you may prefer to use the Par Value Method.
  • Par Value Method: This method calculates the amount due based on how many shares are authorized, how many shares are issued, and the amount of total gross assets. It takes a company’s “par value” per share times the number of shares it has authorized (i.e. the total market capitalization), rounds up to the nearest million dollars, and takes 0.035% of that as the tax.Total Gross Assets shall be those “total assets” reported on the US Form 1120, Schedule L (Federal Return) relative to the company’s fiscal year ending the calendar year of the report. The tax rate under this method is $400.00 per million or portion of a million. If the assumed par value capital is less than $1,000,000, the tax is calculated by dividing the assumed par value capital by $1,000,000 then multiplying that result by $400.00.

    Delaware Franchise fee is easy to pay, and our team can assist you with this process. An incorporator
  • The incorporator is someone with the power to represent the business as an agent during the process of development.
  • The incorporator has the authority to prepare, sign, as well as submit the Certificate of Incorporation, and also any other required records.
  • The incorporator's authority ends when the company is signed up - by filing the Certification of Incorporation with the state - and the first Director is designated. The incorporator does not own the company.

    The officer's roles Appointed by the Board of Directors, officers are in charge of the everyday procedures. Firstbase.io collects this data to complete the necessary paperwork when creating a Corporation.

    The appointed officers are:
  • Chief Executive Officer (CEO): Responsible for overseeing all of the day-to-day operations of the business. Some common roles include:
  • Growing the value of the company
  • Providing direction and top-level decision making for the business and business strategy
  • Overseeing the operations of the business
  • President: Responsible for logistics and business operations and confirming the company policies are implemented effectively. Some common roles include:
  • Guiding and leading managers
  • Implementing company strategy
  • Providing feedback and recommendations to the board of directors
  • Chief Financial Officer (CFO): Responsible for all financial matters which may include maintaining all the corporate financial records and preparing financial reports.
  • Secretary: Responsible for maintaining corporate records, preparing and organizing shareholder meetings and providing necessary corporate documentation when needed.

    Please note that one individual can fill all of the roles of the appointed officers.

    The certificate of incorporation determines the existence of the company. In Delaware, they charge a filing fee, and the application should be submitted to the Delaware Secretary of State. Firstbase.io handles all the necessary steps and our one-time fee includes the filing fee, EIN obtainment, business bank account opening, post incorporation documents, legal consultations and over $20,000 in rewards and incentives for additional services and tools for your business.

    Few requirements exist to fill out a certification of incorporation. To maintain flexibility you can mention only the name of your business and the name of the Incorporator to avoid future modifications to the certificate.

    The Board of Directors takes on the bylaws in its business resolutions. The Bylaws state the policies and the company procedures that impact governance. The Board has the duty to approve the Approval of Organizational Resolutions. It is a document with the organizational matters approved by the Board of Directors.

    The detailed process is one that Firstbase.io will manage on behalf of all our customers. The customer success team at Firstbase.io utilizes partnerships, our internal tech-enabled service, and the data collected during the online application process to efficiently complete all the necessary steps to incorporate a US legal entity. The Firstbase.io platform and team draft all of the necessary legal documents in-house.

    Please reach out and complete the online application to speak with a representative from our team.

How do I select the name of my company?

Founders should ensure that their company name isn't the same, in their state, as that of an existing corporation, partnership, or LLC. If it is identical or similar, the founders need to choose another name.

Once you have a business name idea, you can go to Firstbase.io and complete the online application. Firstbase.io validates that your specific company name is available in the state where you wish to incorporate, and the Customer team will work with you to find alternatives and suitable variations if your exact business name is not available.

Firstbase.io offers resources and partnerships that can help trademark your company name and/or brand in the United States.

What are shareholders and LLC members?

Simply described, shareholders are owners of a corporation and members are owners of limited liability companies (LLCs). Although there are some overlaps, generally speaking these are terms for owners of your legal entity, depending on the type.

Shareholders are individuals who own shares of a private or public company. Shareholders can be an individual, a company, or another institution. Shareholders (or stockholders) can receive dividends from the shares and a portion of the company’s profits. Shareholders are not liable for the debts of the company.

Members are included in the formation documents of the LLC. Members of the LLC share the risk of liability equally with the other registered members. Members of an LLC may or may not be a part of the operations of the company.

As a foreign founder or owner, do I need to have a US citizen or permanent resident as a stockholder or LLC member?

To develop a United States business, there are no US federal or state regulations demanding a shareholder or LLC member to be a US citizen or green card holder. Thus, a foreigner can own shares of a US corporation or be a member of an LLC.

What are the differences between incorporating in Wyoming or Delaware or another state?

Delaware and Wyoming are renowned for their business-friendly legislation. They usually have low fees, and more organizational freedom. Delaware has an established body of case law and an innovative perception of social enterprises. For instance, the state created a Public Benefit Corporation (B-Corporation) as a new form of a corporate structure.

The decision about where to incorporate involves the analysis of the business model, the corporate structure, and the entrepreneur’s goals. Thus, a corporate lawyer can find the best state law for a particular enterprise. Firstbase.io specifically incorporates LLCs and Corporations in Wyoming and Delaware due to the flexibility and low-cost for starting a business. You can find a more detailed breakdown below:

Choosing Wyoming to incorporate

  • Wyoming LLC:
  • Low cost, manageability, flexibility and a focus on small business
  • No franchise or state personal and corporate income tax
  • No minimum annual fees
  • Does not require listing of members and keep your information private
  • Wyoming C Corporation:
  • Favors smaller and privately controlled companies
  • Ownership information is kept private
  • No franchise or state income tax
  • Annual report is $50 on the anniversary month of incorporation
  • Unlimited shares allowed at no par value
  • Does not collect corporate income tax information to share with the IRS

    Wyoming is extremely popular among bootstrapped companies and smaller companies that don’t want to raise venture capital, and want to avoid paying Delaware franchise fees (usually, a few hundred dollars per year for early stage companies). The only fee would be a $50 annual report filing fee.

    Choosing Delaware to incorporate Delaware is worldwide renowned because of its corporate law and jurisprudence. The law is innovative and flexible allowing for significant advantages for early-stage companies, technology startups and foreign-owned US entities. More than 60% of Fortune 500 companies are incorporated in Delaware.
  • Delaware LLC:
  • State laws provide the strongest shield of any state
  • Most pro-business laws in the US
  • No state income tax if your operations are in other states or countries
  • Annual franchise fee is $300
  • Delaware C Corporation:
  • Favors larger companies, often publicly held ones
  • Angel and VC investors may prefer to invest in Delaware Corporations
  • Has a history of over 100 years addressing shareholder rights
  • “Pro-Management”
  • Offers exceptional flexibility in terms of corporate structuring and the broadest privacy protections
  • Minimum franchise fee is $400 (if you use the par value method)
  • Minimum franchise fee is $175 (if you use the authorized shares method
  • Ownership information is not reported to the state.

    As a result, foreign founders or business owners find tremendous value in the flexibility of the Delaware state tax regulations.

The information contained on this guide, whether free or paid, is for educational and informational purposes only. The Company assumes no responsibility for errors or omissions in the contents of the guide. The information contained on this guide is not intended as, and shall not be understood or construed as, legal or tax advice. The information contained on this guide is not a substitute for legal advice from a licensed attorney who is aware of the facts and circumstances of your individual situation. We have done our best to ensure that the information provided on this guide is accurate, providing valuable information. Regardless of anything to the contrary, nothing available on or through this guide should be understood as a recommendation that you should not consult with an attorney to address your particular information. The Company expressly recommends that you seek advice from an attorney prior to taking any actions. Neither the Company nor any of its employees, owners, or contributors shall be held liable or responsible for any errors or omissions on this guide or for any damage you may suffer as a result of failing to seek competent legal advice from a licensed attorney who is familiar with your situation.

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