How to incorporate a business in US

First, Choose a state where you want your business incorporated. It can be different from your state of residence or where you actually do business. Nearly 50% of corporations are incorporated in the State of Delaware. This state has corporate friendly laws and a Chauncery to adjudicate cases against corporations. Hence, investors feel safe to put their money into companies incorporated in Delaware. However, incorporations in other states is not really bad. In fact, if you do business in California and intend to do business only there, then it is best to incorporate in California.

Once you decide the state (also known as domicile for the corporation), find a "registered agent for services" in that state. There are many companies that offer this service. Contact them and they will get the legal formalities done for you. There will be annual registered agent fees, franchise fees to that state, mail forwarding fee, and if you choose, a virtual office and related costs. You will receive a signed certificate from the Secretary of State, Division of Corporations about the new corporation.

After incorporation, call the nearest IRS and get an "entity identification number" (aka tax id) immediately. The IRS is a federal agency, while the state taxation is handled by the Franchise Taxboard. No need to call the franchise taxboard.

Once you incorporate in some state, you must also qualify to do business every state where you actually want to do business. Suppose you incorporate in Delaware but want to do business in California, you must file for a certificate of qualification with CA secretary of state. To do this, you must find a "agent for process service" in california (someone other than yourself or your office). With your company's chosen address, address of agent for process service, you can file for this qualification. Usually it is done within the same day. There will be a one-time fee, usually $100 for this cerfiticate and an annual fee of $25 to maintain status. This cerfiticate is also required to pay your annual taxes to california. The certificate will mention that you are qualified to do business in california as a "foreign corporation" (foreign to california).

Finally, you must also apply for a business license with the local city. You need to go to the local city office, file for a business license. They will look at your business address and decide if it is classified as a business location for the purpose you are mentioned in the application. Then they will issue a business license.

To open a business checking account in a bank, you need all the documents including the seal of the corporation. However, some banks may just use the incorporation papers (articles of incorporation) alone to open a bank account, while a credit facility/ business credit card etc will require all the legal documents listed above. It is best to find a bank that is consistent with the theme of your business and opening/minimum balances, frequency of transactions etc. Most banks charge a monthly maintenance fee, but some do permit free-business-checking. In the state of New Jersey we found 'Sovereign Bank' that offers free business checking account. Banks like Bank-of-America provides promotional free-business-checking accounts with fine prints. Read the fine prints!

Business checking accounts do not fetch any interest. An associated money-market account is required to get interest.

A checking account and a credit card establish credibility for a business in addition to building a healthy history. Aged corporations with good credit history gain significant value even if they have no assets. The initial credit limit will be set at principal's worth. As the business gains cashflow and builds a credit history, its credit worthiness will be separately established.