Corporations

Corporations are typically used for larger companies, as traditional entities, but you do not need a large company to have a corporation.  Owners of corporations are shareholders.  Shareholders make contributions in exchange for shares in the company.  Shares are representative of the shareholders ownership interest in the corporation.  You will need to have Articles of Incorporation prepared and filed witht he proper governmental body in order to incorporate.  State law may require you have bylaws as well, and from a practical standpoint, if there is more than one shareholder, you should absolutley have bylaws.  More information about starting a corporation, about Articles of Incorporation and Bylaws, are below.

Steps to Forming a Corporation

 

1. Choose a Name

2. File the Articles of Incorporation

3. Sign and adopt Bylaws.

 

See below for descriptions of each step to forming a Corporation.

 

 

Step 1:  Corporations Name Considerations

 

• Web Domain Availability:  Think about which website domain name(s) you want to use.  This may alter your choice in names for your corporation.  Domain registrars, such as GoDaddy and Network Solutions, offer searches for availability of web domain names. 

• Trademark Availability:  A search of intended names should be conducted.  A search should be performed through the U.S. Patent & Trademark Office for similar names used for similar products and/or services.  If you expect to conduct business outside of the U.S., there may be applicable name searches to perform in order to ensure you are not infringing on another name.  Of course, using a ficticious name or "d/b/a" meaning, "doing business as," is an option and may be an alternative to avoid trademark infringement.

• State Name Availability: A search of intended names must be conducted through the  applicable state office.  A name the same or similar that is already registered and active could disqualify theuse of your intended business name.  Some states will permit the use of a name for a corporation even if the same name is used for a corporation, but this is not recommended as it could cause confusion and lead to liability. 

 

Step 2:  Adopting an Articles of Incorporation

The Articles of Incorporation are essentially a declaration of formation, and once filed with the state, legitimize the formation of the corporation.  In most, but not all, circumstances, the Articles of Incorporation need not contain much more information than the following:

 

• The name of the corporation;

• The principal address of the corporation;

• The mailing address of the corporation;

• The name and address of the Registered Agent of the corporation (the person who will accept service of process of legal documents on behalf of the corporation);

• The incorporators and officers of the corporation;

• The effective date of formation of the corporation; and

• The purpose of the corporation.

 

Even though often generally basic, the Articles of Incorporation could be greatly detailed, and great care should be given when crafting the Articles of Incorporation, as they may act as a declaration to the public as to who may bind the corporation to contractual obligations as well as could act as a restriction as to what and how business is operated.

 

Step 3: Adopting Bylaws

The Bylaws are a set of rules on how to govern your corporation.  If drafted properly, the Bylaws will dictate the policies and procedures related to: 

 

• What the corporation is and is not permitted to do;

• What actions to be taken by the coporation require a vote;

• What percentage of ownership interest is required to pass a measure;

• Which shareholders can vote on which matters;

• How to break a tie in votes;

• How to resolve disputes between the shareholders;

• How to resolve disputes between and among the shareholders and officers;

• Who has authority to bind the company;

• In what instances a capital contribution may be required;

• Consequences if capital contributions are not made;

• Alternatives if capital contributions are not made;

• How distributions, capital accounts and tax allocations are to be made;

• When and how the company may be dissolved;

• Indemnifications of officers and/or shareholders;

• Procedural protocals, such as notice provisions; and more.

 

If Bylaws for a company owned by more than one shareholder does not address all of the above and more, it may not properly protect you.

 

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