How to Start a Corporation: 8 Steps, Costs, C vs. S Corp

To start a corporation, you choose a state, check that your name is available, appoint a registered agent, file articles (or a certificate) of incorporation with the state, name directors and adopt bylaws, issue stock, get an EIN from the IRS, and then file annual reports and taxes. The SBA says registration usually costs under $300.

Filing is the easy part. The choices you make on the way in are what stick around.

The biggest one is tax treatment. A C corporation pays its own income tax and can take on any number and type of investors; an S corporation passes income through to its owners but is limited to 100 eligible shareholders and one class of stock. This guide covers the general path for any business. If you're building a startup to raise venture capital, the step-by-step guide to incorporating a startup covers founder stock, vesting and 83(b) elections in depth.

Definition: A corporation is a legal entity, separate from its owners, that is created under state law, owned by stockholders, governed by a board of directors, and able to own property, sign contracts, and issue stock.

What a corporation is and why it matters

Filing articles of incorporation creates an entity that can:

Own property and intellectual property.
Enter contracts and open bank accounts.
Issue stock (and, for most corporations, stock options).
Shield its stockholders from personal liability for the company's debts, as long as corporate formalities are respected.
Raise money from investors.

Unlike a sole proprietorship or partnership, a corporation keeps existing if a founder leaves. If you want pass-through taxes with fewer formalities, compare this route with starting an LLC before you file.

C corp vs. S corp vs. benefit corporation: how to think about the choice

	C corporation	S corporation	Public benefit corporation
Federal tax	Entity pays 21% flat rate; dividends taxed again	Pass-through to owners	Taxed like a C corp unless it elects S status
Owners	Unlimited, any type	Up to 100; no nonresident aliens, partnerships, or corporations	Unlimited
Stock classes	Multiple	One	Multiple
Often suits	Venture-backed startups	Profitable, owner-run businesses	Mission-driven companies

Our short version: if there's any real chance you'll raise from a venture fund, start as a C corp. If you plan to run a profitable business you own outright, an S corp may save you tax. The expensive mistake is picking the second and needing the first.

C corporation

The usual choice for companies that plan to raise outside capital. It allows unlimited stockholders of any type, multiple stock classes (common for founders, preferred for investors), and standard stock option plans. The IRS taxes corporate profits at a flat 21 percent, and stockholders pay tax again on any dividends. Most startups reinvest rather than pay dividends, so that double tax matters less early on. See common vs. preferred stock for how multiple classes work.

S corporation

An S corporation is a corporation that elects pass-through tax treatment by filing IRS Form 2553, signed by all shareholders. The IRS requires that it be a domestic corporation with no more than 100 shareholders, only allowable shareholders (individuals, certain trusts, and estates, but not partnerships, corporations, or nonresident aliens), and only one class of stock.

Those limits rule out venture funds and preferred stock. But S corps can suit service firms, creators with steady income and family businesses.

Benefit corporations and B Corp certification

A public benefit corporation is a legal form available in Delaware and many other states that commits the company to a stated public benefit alongside profit. B Corp certification is different: it's a private certification administered by B Lab, not a legal entity type. One is a legal structure. The other is a badge.

Where to start a corporation: choosing a state

You can incorporate in any state, but state laws generally require you to register in each state where you actually do business.

Your home state is usually simplest for a local business, a creator business or a company that won't raise institutional money. You file once, pay one set of fees, and deal with one set of rules.
Delaware is the usual choice for startups raising venture capital, because investors and their lawyers know its corporate law and its Court of Chancery well.
Foreign qualification. If you form in one state and operate in another, the SBA notes you will likely need to file for foreign qualification (usually a certificate of authority) in that second state, and many states also ask for a certificate of good standing from your home state.

A Delaware filing for a coffee shop in Ohio mostly buys you two sets of fees. Pick Delaware because investors expect it, not because it sounds official.

How to start a corporation: 8 steps

Choose your state. Typically your home state for most local businesses; Delaware for many venture-backed startups.
Pick and check a name. Search the state's business entity database and include a corporate ending such as "Inc." or "Corporation." A trademark search before you commit is worth the time. If you don't have a name yet, the guide to naming your startup runs the domain, trademark and pronunciation checks in one week.
Appoint a registered agent. Every state requires one, with an address in that state, to receive legal papers. You can serve yourself in your home state or pay a commercial agent.
File articles or a certificate of incorporation. Submit it to the secretary of state (in Delaware, the Division of Corporations) with the company name, registered agent, and number and par value of authorized shares, and pay the filing fee.
Adopt bylaws and appoint directors. The incorporator appoints the initial board, which adopts bylaws, appoints officers, and approves stock issuances. Record these decisions with board resolutions.
Issue stock. Sign stock purchase agreements with each owner and record them in a stock ledger. If co-founders' shares vest over time, see the incorporation guide for the 30-day 83(b) election.
Get an EIN and open a bank account. Apply for an Employer Identification Number on IRS.gov, where it's free. Then open a business bank account; keeping company money separate from personal funds helps protect the liability shield.
Register for state taxes and calendar annual filings. Sign up for state payroll and sales taxes where they apply, foreign qualify where you operate, and put your annual report and tax deadlines on the calendar.

How much it costs to start a corporation

State filing fees are the main fixed cost. Two examples from the states' own fee schedules:

State	Fee to form a corporation	Annual filing
Delaware	$109 minimum (rises with authorized shares)	$50 annual report plus franchise tax, due March 1
Massachusetts	$275 minimum (up to 275,000 shares)	$125 annual report ($150 if late)

On top of the state fee, budget for a registered agent if you use a commercial one, any expedited filing (Delaware charges $500 for 2-hour and $1,000 for 1-hour service), and legal or incorporation-service fees. The EIN costs nothing.

Annual compliance: keeping your corporation in good standing

As a baseline, a corporation typically keeps a stock ledger, documents board and stockholder decisions, files a federal corporate return (Form 1120 for a C corp, Form 1120-S for an S corp), and files the annual report and pays any franchise tax its state requires.

Delaware is the one founders ask about most. The annual report fee is $50 for non-exempt domestic corporations, and the report and franchise tax are due March 1. A late report costs a $200 penalty plus 1.5 percent interest per month on unpaid tax.

This is where a lot of founders open a scary bill. Delaware calculates franchise tax two ways, and you can file using whichever method produces the lower bill:

Authorized shares method: $175 for up to 5,000 shares, $250 for 5,001 to 10,000 shares, plus $85 for each additional 10,000 shares.
Assumed par value capital method: $400 per million dollars (or portion) of assumed par value capital, with a $400 minimum. Delaware requires you to report gross assets and issued shares to use it.

Illustrative worked example. A company has 10,000,000 authorized shares (par value $0.00001), 8,000,000 issued, and $500,000 in gross assets.

Authorized shares method: $250 for the first 10,000 shares plus 999 increments of $85 equals $85,165.
Assumed par value capital method: $500,000 / 8,000,000 = $0.0625 assumed par (higher than the $0.00001 stated par, so it is used). Multiply by 10,000,000 authorized shares for $625,000 of assumed par value capital, which is under $1M, so the tax is $400.

The company pays $400 in tax plus the $50 report fee instead of more than $85,000. Same company, same shares, a different line on the form. Delaware's maximum tax is $200,000 ($250,000 for large corporate filers).

Tools that make incorporating easier

Online incorporation services such as Stripe Atlas and Clerky handle Delaware filings, EIN applications and standard paperwork for a package fee.
Cap table software such as Carta keeps your stock ledger and option grants in one place.
A lawyer is usually worth it for anything unusual, such as multiple founders with different contributions, outside investors or international owners. See choosing a startup lawyer.

Common mistakes when starting a corporation

Filing in Delaware for a local business, then paying two states' fees without needing to.
Electing S corp status and later discovering you can't issue preferred stock to investors.
Paying Delaware franchise tax under the authorized shares method without checking the alternative.
Mixing personal and company funds, which can weaken liability protection.
Skipping bylaws, board approvals and a stock ledger because the company is small. Small is exactly when it's cheap to do right.
Failing to foreign qualify in the state where the team actually works.

If you're still testing an idea, 1752vc's Launchpad program, a 12-week self-paced sprint for aspiring founders, helps you validate it and build early traction before you worry about scale. Once the company is formed, run your deck through the Pitch Deck Analyzer for AI feedback.

The bottom line

Incorporating is a weekend of paperwork. Picking the wrong state or tax type can cost you a year of cleanup when an investor finally shows up.

Decide what you're building first: a business you'll own, or a company you'll fund. Then file for that one.

The state charges you once to form. Your choices bill you every year after.

Key takeaways

Starting a corporation means filing articles of incorporation, appointing a registered agent and directors, adopting bylaws, issuing stock and getting a free EIN.
The SBA says registration usually costs under $300; Delaware's minimum corporate filing fee is $109 and Massachusetts' is $275.
S corporations are limited to 100 eligible shareholders and one class of stock, so companies planning to raise venture capital usually form C corporations.
As a rule of thumb, many businesses incorporate in their home state unless they plan to raise venture capital, and foreign qualify wherever they operate.
Delaware corporations file a $50 annual report and franchise tax by March 1; the assumed par value capital method often cuts the bill for startups.

Frequently asked questions

How much does it cost to start a corporation?

It depends on the state. The SBA says total registration costs are usually under $300; Delaware's minimum filing fee for a stock corporation is $109 and Massachusetts' is $275. Add registered agent fees, any expedited filing, and legal or service fees, plus annual report fees and franchise taxes every year after formation.

What is the difference between a C corp and an S corp?

A C corporation pays federal income tax at the entity level (a flat 21 percent) and can have unlimited shareholders and multiple stock classes. An S corporation is a corporation that elects pass-through taxation with IRS Form 2553; it can have no more than 100 eligible shareholders, no nonresident alien, partnership or corporate owners, and only one class of stock.

How long does it take to start a corporation?

Filing itself can take anywhere from the same day to a few weeks, depending on the state and whether you pay for faster processing; Delaware sells 2-hour and 1-hour expedited service. Allow extra time for the name search, registered agent, bylaws, stock issuance, EIN and bank account before you start doing business.

Can students start a corporation?

Yes. Adult students can form a corporation the same way as anyone else, and many use online services to keep costs low. Minors may face restrictions on signing contracts, so it is worth checking state rules and considering involving a parent or lawyer. Keeping school and business finances separate from day one also helps.

What does a corporation have to file every year?

Many states require an annual or biennial report, and some charge a franchise tax. Delaware, for example, requires a $50 annual report and franchise tax by March 1, and Massachusetts charges $125 for its annual report. Corporations also file a federal income tax return: Form 1120 for C corporations or Form 1120-S for S corporations.

Sources

Disclaimer: This guide is for general education only and is not legal, tax or investment advice. Laws, market data and program terms change, so it may not reflect the latest developments or fit your situation. Treat it as a starting point, not a source of truth, and talk to a qualified lawyer, accountant or financial adviser before you make decisions.