If you are planning to start a business, you should consider organizing it as a corporation. There are some very real advantages of doing so.
A corporation is an independent legal entity, separate from its shareholders. A corporation has the power to purchase property, hire employees and engage in any lawful business or activity regardless of whether there are also people involved.
A Georgia Corporation can be formed for any lawful purpose (unless specifically prohibited) and may be incorporated as a non-profit organization as well, though it need not be. It has certain powers, including the ability to do business in other states.
Forming a Corporation in Georgia is Easy
Step 1: Create a Name For Your Georgia Corporation
Your first step is to come up with a name for your corporation. You can choose any name you want as long as it ends with “Incorporated,” “Corporation,” or an abbreviation of one of those. It also cannot contain certain words which are restricted by Georgia law, such as Bank, University, Hospital, Assurance, and others.
- In Georgia, your corporation name must contain the phrase “Incorporated” or “Corporation” or an abbreviation of one of those.
- Words that a Georgia Corporation cannot have in its name include Bank, Savings and Loan Association, Credit Union, Insurance Company, Transportation Company, Telephone Company, Electric Membership Corporation, and Trusts.
Is my corporation name available in Georgia?
You can check to see if a particular proposed name is available by going to the Georgia Secretary of State’s Corporations Division website.
- Once you have decided on a name for your Georgia Corporation, you should reserve it so that no one else can use it.
- A good way to protect your company name is to file an application with the Secretary of State, who will issue your newly formed Georgia Corporation a Certificate of reservation. This makes the name of your corporation unavailable for use by any other Georgia business entity now or in the future and protects your company against legal disputes.
- The filing fee is $50, payable by check or money order to SOS – Georgia Corporations Division.
- The name must also be distinguishable on the records of the Secretary of State; if it isn’t distinctive, we may place qualifying words such as “Incorporated” or “Company” between portions of your proposed name and/or change one word in the name for another which would be appropriate.
It is advisable to have a standard format for all of your corporation’s names so that you can more easily keep track of them. For instance, Incorporated ABC might be a Corporation name, and ABC, Inc. might be an LLC name.
Is the URL available?
If you are using the name for your business, then you should also check to see that it is available as a domain name. If you plan on doing any type of advertising online, this could be very important down the road. It can also help protect your brand name if someone else tries to use it for their own purposes.
Step 2: Choose a Georgia Registered Agent
A Registered Agent is a person or business entity designated to receive important legal and tax documents on behalf of your corporation.
You can easily set up a free account with LegalZoom to take care of this requirement, but it is also possible for you to act as your own agent (in which case you would file IRS form 8822-B ) or hire any other individual or business that may be qualified in that capacity.
FAQ: Choosing a Registered Agent
Q. Can I be my own agent?
A. You may choose to become your own agent, or you can designate any person of legal age as your agent. A Registered Agent is a person, business entity, or non-profit organization that agrees to accept documents and notifications on behalf of the corporation.
The only requirement is that a GA Registered Agent for Corporations must have a physical street address in the state of Georgia, where all official corporate notifications will be sent.
Q: What if I am not incorporated yet but want to open up a business account with LegalZoom?
A: For now, you cannot use LegalZoom if not already incorporated – we’ll let you know when this feature becomes available. This is currently the case until further notice.
Q: How do Corporations designate a Georgia Registered Agent?
A. During the formation process for your Georgia Corporation, you will be asked to provide us with an address for your Georgia Registered Agent. If you are using LegalZoom’s service, that address will automatically show up in our system when we receive confirmation of your filing application from the Secretary of State.
Step 3: Choose Your Georgia Corporation’s Initial Directors
Georgia law requires that there be at least one initial Director of the Corporation; as such, you must name an individual as an “initial director” for your new corporation.
1) Create and Approve Corporate Bylaws
Your Georgia corporation will need to have a set of initial Bylaws approved by the Board of Directors and filed with the Secretary of State.
These documents establish your business procedures and day-to-day operations, including whether or not shareholders will be involved in voting on certain issues, which can include electing directors or approving major transactions such as a merger or sale of all assets.
Where can I find Georgia’s Standard Corporate Bylaws?
Georgia law does not require that you file any specific form of corporate bylaws with the Secretary of State; however, some attorneys do recommend that you seek legal help in drafting these documents. If you choose to draft your own bylaws, you can use LegalZoom’s free Georgia standard business bylaws as a template.
2) Appoint Initial Directors
One of the first decisions you will need to make as a newly formed corporation is your initial Board of Directors. While it may be tempting to hand-select your own directors, this can raise red flags with federal regulators who are tasked with monitoring companies for any signs of impropriety or illegal activity.
How does Georgia law define initial Board members?
A majority (or more than 50%) of your board must consist of individuals who were among your incorporator’s first choices when electing corporate officers. In addition, at least two shareholders must also serve on the board – if there are only three shareholders in an LLC, for example, then one person cannot serve alone as a director.
3) Choose a Share Structure and Strategy
The traditional way of structuring ownership in a Georgia corporation is through the use of common and preferred shares, which grant owners voting rights and other special privileges depending on what percentage of each type you own. If you want to take a more simplified approach to corporate structure, then it’s possible to issue just two types of stock: Class A and Class B.
How many different classes for stock can I create?
You may divide your company into any number of stock classes that you desire; however, the board must approve all share structure changes before filing with the Secretary of State. The only requirement in Georgia is that there be at least one class for each shareholder’s stock – in a situation where a sole shareholder would hold both classes, this would be considered a single class of stock.
When will I receive my initial corporate stock certificate(s)?
Before the Secretary of State issues new stock to your company, you must first mail us copies of both the board’s action and the minutes that detail those decisions.
Once they have received these forms and confirmed that they meet all statutory requirements, they will send you certificates for each share of stock authorized and allocated to shareholders. Keep in mind that it may take up to 60 days for this process to be completed.
4) Create and Execute an Incorporator’s Statement
Every corporation in Georgia requires an incorporator’s statement, which outlines the proceedings during the initial formation of your business. This document must be signed by two shareholders and a certified public accountant (CPA) who vouches for the accuracy and legitimacy of all financial information provided to state regulators.
How should I word my company’s incorporator’s statement?
There are no specific guidelines on how to word this document; however, it must include enough detail about the incorporation process to satisfy federal law requirements. In a standard incorporator’s statement, you will need to list basic information such as:
- The name of your new business
- The date that incorporation proceedings were started by the incorporator(s)
- The type of business that the corporation will be involved with
- The total number of shares that are authorized by the board.
FAQ: Initial Directors & Share Structure
Q. If I have a sole shareholder in my new corporation, can they serve as an initial director?
A. No. In order for a business to be incorporated in the state of Georgia, there must be at least two board members present during the formation proceedings. This rule is listed under O.C.G.A 14-2-2210
Q: Can one person hold both Class A and Class B stock?
A: No. Under O.C.G.A 14-2-224, a corporation may only authorize a minimum of one class for each individual who holds stock or voting rights within the company, regardless of how many shareholders are involved with the company’s operations. As an example, if Joe Smith were to own stock in an LLC, Joe would be given Class A and Class B shares.
Step 4: File the Georgia Articles of Incorporation and pay the $100 filing fee.
The Secretary of State’s office requires that you submit all forms and the $100 filing fee together in order for your business to be officially incorporated under state law. We highly recommend using a personal check, cashier’s check, or money order when paying this filing fee.
FAQ: Filing the Georgia Articles of Incorporation
Q: How do I submit my Georgia Articles of Incorporation to the Secretary of State?
A: The original signed documents, along with a self-addressed stamped envelope, should be mailed to the initial registered office at the Office of the Secretary of State, State Corporations Division 119 E. Confederate Ave., Suite 230-A Atlanta, GA 303031n
Q: How long will it take for my Georgia Articles of Incorporation to be processed?
A: Processing times vary depending upon the volume of filings that we receive during a given period. In most cases, our office aims to process your corporation paperwork within 7 to 10 business days; however, this timeframe may change depending on the volume and/or complexity of other filings that are submitted to our office during any given week.
Step 1: Mail (or fax) all documents and forms together as one complete submission (in duplicate) to the Georgia Department of Revenue – Corporations Tax Section – P. O. Box 8733 – Atlanta, GA 30301-8733
Step 2: Pay the $50 fee to the Department of Revenue (Corporations Tax Section) at the time you submit your documents for processing
Step 3: File a Notice of Incorporation with the Department of Revenue (Corporations Tax Section)
The Secretary of State’s office will not file your corporation’s initial Notice of Incorporation under state law. This form must be completed and submitted to our office by either you or your business’ CPA, along with a self-addressed stamped envelope that has been addressed to the Corporations Tax Section in Atlanta, GA.
Pros and cons of Georgia Corporation Registration
The benefits of incorporating your business under state law include:
- The fact that you will be able to protect yourself against personal liability for debts and financial obligations.
- You can also receive certain tax exemptions; however, it is important to note that the Secretary of State’s office does not offer any direct tax advice.
On the other hand, there are some disadvantages that come with filing for Georgia corporation registration:
- This form of incorporation typically has higher annual fees when compared to other states in the nation, and most businesses must submit annual reports with our office in order to remain in compliance with state law.
How much does it cost to form a corporation in Georgia?
The Secretary of State’s office requires that you submit all forms and the $100 filing fee together in order for your business to be officially incorporated under state law. We highly recommend using a personal check, cashier’s check, or money order when paying this fee.
Set Up a Corporate Records Book
In order to maintain a corporation’s good standing under state law, it is important that all business owners keep accurate and up-to-date meeting minutes in a corporate records book.
This process helps you stay compliant with state law and track important dates, record important votes, and identify the current members on your board of directors.
Open a Business Bank Account
One of the first steps that you will want to take once your business is officially registered under state law is establishing a business checking account. It is important that all business owners using the same LLC name are adequately separated in terms of financial activities and obligations, which can be easily achieved by opening up multiple business banking accounts.
1. Get a Business Bank Account
Before you start a business, it is important that you have the right tools and personal assets available to help your company run as smoothly as possible. One of those key tools is a business checking account; however, not every bank offers the same pricing and services, which means that it is up to each entrepreneur to find an option that best fits their needs.
2. Open a Business Credit Card
Once your business starts gaining momentum and securing larger contracts, you may find that it has become easier to make purchases and secure services by using a corporate credit card. The good news is that most banks offer small-business credit cards with low requirements and high approval rates; however, it is important that each corporation carefully reviews the terms before signing up for this type of product.
3. Set Up Complete Separation Between Business & Personal Accounts
The best way to manage your business finances is by staying organized and never mixing personal activity with professional obligations. Keeping complete separation between your business checking account or credit cards and any personal accounts will ensure compliance with state law while helping you maintain accurate and up-to-date records in accordance with federal tax regulations.
4. Establish and Build Your Business Credit Score
A business credit score involves an individual’s FICO score; however, there are some key differences. Although it may seem like a good idea to take out business lines of credit or loans to finance large purchases for your company, keep in mind that borrowing impacts your business’s financial health and can potentially damage its cash flow.
5. Hiring a business accountant
Once your business starts to gain traction, you will likely have more administrative responsibilities than simply filling orders or working with clients. One of the best ways to ensure that all aspects of your business stay on track are by hiring a qualified accounting service.
Get Insurance for Your Business
One of the most important things that any business owner can do is to maintain adequate insurance coverage. Although the specifics of your policy will depend on a variety of factors, such as industry, location, and the number of employees, it is generally a good idea to have an insurance broker or registered agent service help you find a policy that covers all potential damages and liabilities.
Types of Business Insurance
There are several different types of business insurance that can be acquired by companies in Georgia, including:
- property damage
- commercial auto
- workers compensation
Although not all industries or locations will require each type of coverage – for example, an automotive repair shop would need commercial auto insurance but not content insurance – it is important that every entrepreneur understands how their work could potentially expose them to risk.
Valuable Coverage Options
The personal umbrella policy is one of the most beneficial tools available to entrepreneurs who own a business in Georgia. This form of product acts as supplemental protection to provide additional financial resources for individuals operating at greater heights above the ground or working inside industrial facilities with heavy machinery.
Another option is excess liability coverage; this type of product helps fill in the gap between the actual liability provided by your primary business insurance policy and the total amount needed to cover potential damages.
Get an EIN
Employer Identification Number (EIN) is a nine-digit number issued by the Internal Revenue Service to help companies conduct business transactions. This frequently requested code is used to identify your company with the IRS for tax reporting purposes, as well as when completing W-2 forms or making employee payments.
How to Apply
Step-by-step instructions on how to apply for an EIN are detailed on the official IRS website, which includes information about where you can submit your application, additional documentation that may be required, and locations of phone banks if you have questions before filing.
If you need any assistance throughout this process, consider hiring a professional service to assist you with acquiring an EIN – it’s well worth the time and money investment. While some entrepreneurs start small with their first business, others have lofty ambitions for massive companies.
Regardless of how much funding you plan to invest or the size of your organization, there are many issues that can affect your ability to grow quickly and become successful. However, by avoiding these common mistakes, you will have a greater chance of success.
Georgia Corporation Licenses and Permits
In order to do business in the state of Georgia, all corporation owners must be licensed or registered with both the Secretary of State (SOS) and the Georgia Department of Revenue (DOR). Most entities operating within this state are required to pay a $50 fee each year for a DOR license.
Types of Georgia Corporation Licenses and Permits
In addition to a DOR license, other permits and registrations that corporations must acquire in Georgia include:
- Professional License from the Georgia Professional Standards Commission
- Sales Tax Certificate of Exemption from the Department of Revenue
- Retail License from the local government area where business is located
- Seller’s Permit from the Department of Revenue
- Unemployment Insurance
- Trust Fund Bond
- Workers Compensation Insurance
- Employer Identification Number (EIN)
- Federal Employer Identification Number (FEIN)
File the Georgia Annual Registration
Every Georgia corporation must file an Annual Registration each year within 60 days of the anniversary month in which it was originally formed. The Anniversary Month can be found on your Georgia business tax receipt (also known as Certificate of Existence), which is mailed to you by the SOS.
Georgia State Corporation Tax Requirements
Every Georgia corporation which has taxable income must file a Georgia corporate income tax return each year. Taxable income is defined as the net amount of income earned or received by your company, fewer deductions for expenses incurred while conducting business.
Once you have determined your total amount of taxable income, multiply that number by 6%, then enter the resulting value on your state return.
Georgia Sales Tax
Although corporations in Georgia are responsible for paying a 6% state tax on taxable income, there is no requirement for them to pay state sales and use tax. However, if your business is registered as a seller with the Georgia Department of Revenue, you must obtain a sales tax permit from either your local government area or the annual registration reminder mailed by the SOS.
In addition, if you have employees who perform services within this state, you may be required to collect sales tax from customers. Therefore, it’s advisable that all new businesses obtain their sales tax certification at least 30 days prior to offering items or services for sale.
Georgia Employer Taxes
All employers located in Georgia must obtain a State Employer Identification Number (EIN) from the IRS. If you file your taxes using an EIN, your corporation will be responsible for paying federal employment taxes such as Social Security and Medicare on all employees.
These employer rates can vary depending on how many employees you have worked within the state of Georgia, but they are typically 1.45% for both Social Security tax and Medicare tax.
How to Get a Georgia Certificate of Good Standing?
If you need to get a Georgia Certificate of Good Standing because your business is applying for financing, then your application will be much more likely to be approved by financial institutions. To obtain this important document, contact the Secretary of State and request that one be sent to you via mail or fax.
How to Run a Georgia Corporation?
1. Maintain Your Georgia Corporation Bylaws
Although Georgia does not have very stringent requirements when it comes to corporation bylaws, you are still required to have them in place before doing business.
Your Georgia bylaws should include the basic information pertaining to your business, including:
- the purpose of your company
- any other relevant details that will help keep your company running smoothly during any legal disputes.
2. Hold Periodic Board Meetings and Record Minutes
Georgia law requires that all corporations hold a minimum of one board meeting annually, but many businesses choose to hold more since they provide an opportunity for managing members to vote on important company decisions.
In order to maintain good legal standing as a corporation in the state of Georgia, it is very important that you keep records about each meeting which include the date, time, and location, as well as who was present and who voted how for every motion brought up during these discussions.
3. Annual Shareholder Meeting
Georgia businesses are required to hold their annual shareholder meeting on the last day of the fiscal year. This meeting is used for business owners and shareholders to vote on important issues such as electing new board members or revising your corporate bylaws.
If you need assistance organizing and executing your corporate meetings, check out our Business Plan Writing Guide for more information about how these successful events can be organized and executed successfully.
Special meetings are often held to address any pressing issues that may exist within your business. Although you can use this time for voting on important decisions, it is typically utilized as a way to inform members about certain information that requires their immediate attention.
Notice of Meetings
In order to hold a valid meeting, not only must you have attendance from your members, but notice of the meeting must be provided as well. In Georgia, all meetings, including special and annual shareholder meetings, should be announced at least 10 days prior to the date it will take place.
The Georgia Business Corporation Code states that all meetings held by your corporation, whether it is an annual or special shareholder meeting, should be recorded in written form. These meeting minutes must contain the date, time, and place of the gathering, as well as who was present and who voted for each motion put forward during the discussion.
What Type of Georgia Corporations Are There?
If you are planning to run a business in the state of Georgia, then you will need to decide what type of corporation best suits your needs. Your operating agreement and corporate bylaws will need to be drafted based on the type of entity you choose:
I. Close Corporation:
As listed in O.C.G.A. 14-2-1010, this type of corporation contains specific rules that apply when certain individuals or enterprises share ownership in a company where they all have an equal say in major decisions such as voting rights and company operations, among other things.
A special resolution is also required for voting members who wish to transfer shares after the death or withdrawal from service of an individual member who can take longer than if it was handled by a traditional majority vote.
II. Limited Liability Company:
Operating in the state of Georgia under O.C.G.A 14-11-410, an LLC is a business structure that offers members specific legal and financial protections, which includes limited liability from any debts or liabilities caused by the company’s major decisions such as purchasing equipment or hiring new staff members, among other things.
As noted in our blog post about forming LLCs in Georgia, there are several characteristics to consider when deciding whether forming a corporation would be better than an LLC for your business, such as how much control you need over day to day operations and if your business could benefit from tax savings provided by S-corporations and partnerships.
III. Publicly Traded Corporation:
There are a variety of benefits that a publicly traded corporation offers to its shareholders and investors, such as access to the company’s financial statements to help outside investors make smart business decisions.
Since you would be responsible for ensuring your business is in compliance with the Securities Exchange Act of 1934, this type of structure may offer your company quick access to capital by opening up stock trading, among other things.
III. S Corporation:
This type of business structure must be approved by the IRS and allows for pass-through taxation, which means that no corporate income tax is automatically withheld from shareholder wages.
A benefit to this form of business is that owners can claim losses within their individual tax obligations on their personal income taxes, which makes it a great choice for many new businesses.
IV. C Corporation:
This type of entity is what you would typically consider a traditional corporation with different classes of shares held by owners who have designated voting rights in the company based on the number of shares they own from common stock all the way up to preferred stock which has additional privileges attached to it.
All shareholders involved in C corporations are subject to double taxation since both dividends and capital gains are included in their individual income taxes.
When forming a corporation in the state of Georgia, it is best to consult with an attorney that specializes in business formation and has knowledge about the local laws regarding corporations. Our legal team at Williams Parker, Harrison, Dietz & Getzen can provide assistance with setting up your company correctly, so you don’t have to worry about breaking any federal or state laws.