1: Selecting A Name
- Permissible corporate names. The laws of most states require that the name of a corporation "contain the term 'corporation', 'incorporated', 'company', or 'limited' or an abbreviation of any of these terms." For example, See Colorado Corporate Code, Section 7-90-601(3). Also, there are words that may only be used in the name of certain types of corporations. The following is California's prohibition on the use of certain terms: "The Secretary of State shall not file articles setting forth a name in which 'bank,' 'trust,' 'trustee' or related words appear, unless the certificate of approval of the Commissioner of Financial Institutions is attached thereto." California Corporate Code Section 201. Finally, the name of a corporation may not be deceptively similar to the name of another corporation incorporated with your state, another corporation registered with your state as a foreign corporation, a trade name registered with the state, or trade name previously registered with the state. For example, see Colorado Corporate Code, Section 7-90-601(2).
- Researching name availability. For all states that allow for online searching of their corporate database for name availability, we given the link on our corporate information page for that state. Please click on the name of your state found in the list on the right column of this page to be taken to the corporate information page for that state.
2: Articles of Incorporation
- In General. The "Articles of Incorporation" (also known as the "Certificate of Incorporation") is the founding legal document of a corporation. It is an application filed with the state to have an artificial legal entity known as a corporation brought into existence and sets forth basic information about the corporation that can also define or limit elements of the corporation's existence. To obtain articles for your state, please click on the link to your state in the upper right-hand column of this page. Click here for the Delaware Articles of Incorporation.
- The incorporators. These are the individual or individuals (most states allow for a single incorporator) who sign the articles of incorporation thus requesting the state to bring the corporation into existence. This is more than a mere administrative act as the incorporators have the power in most states to name the first board of directors of the corporation.
- Registered Agent. This is the individual or corporation located within the state of incorporation who receives all legal notices from the state relative to the corporation and is recipient of service of process should the corporation be sued. All states require that a registered agent be named in the articles of incorporation.
- Corporate Purpose. In some states, one may merely state a general purpose for the corporation, such as: "to engage in any lawful act or activity for which a corporation may be organized under the general corporation law of California". In others, a specific corporate purpose must be named in addition to the general, i.e., "operation of an internet legal forms system and related activities". The instructions to the articles published by the state shall tell you whether a specific purchase must be named.
- Duration. The duration of a corporation is almost always listed as "perpetual" in the articles. This means there is no stated time limit at which point the corporation shall be dissolved.
- Initial Board of Directors. The following states require that the initial board of directors be named in the articles of incorporation: Alabama, Arizona, District of Columbia, Maryland, Massachusetts, Nevada, New Jersey, New Mexico, Rhode Island, South Dakota, and Texas. Louisiana requires the filing of a form entitled "Initial Report" with the articles of incorporation and, in the initial report, the incorporators are to name the first board of directors. All others do not require that the initial board be named in the articles of incorporation; however, it is permissible to do so.
3: Publication
- Only Arizona, Georgia, and Nebraska require the incorporators to publish notice of the incorporation for a set period of time (usually once per week for four weeks). Please go to the Secretary of State's site for the state in question to obtain additional information on this subject (note: if you click on the state name above you shall be taken to a page containing the proper link).
4: Initial Board of Directors
- If the initial board of directors was named in the articles of incorporation, then you can skip this step.
- In all states, the incorporators (i.e., the individuals who signed the articles of incorporation) may elect the initial board of directors who serve until the first annual meeting of shareholders (at which time a new board is selected by the shareholders).
- There are two methods for electing the initial board of directors if done by the incorporators: (a) through a meeting for which prior written notice was given and (b) through unanimous written consent.
- Board Size. All states except the following allow the board of directors to consist of one board member without qualification: Arkansas, California, Massachusetts, Missouri, Ohio, Utah and Vermont (please click on the name of the state to see its statute relative to the required number of directors).
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Sample Bylaws from MedLawPlus.com®
Sample Board of Directors Resolution from MedLawPlus.com®
Links To State POA Information
5: Adopt Bylaws
- If the board of directors have been named in the articles of incorporation, generally they shall adopt the initial bylaws of the corporation. If the board of directors have not been named in the articles of incorporation, then either the incorporators or the board of directors may adopt the the initial bylaws in most states. Also, in some states, the shareholders may also adopt the initial bylaws. Click here to see a listing for each state on this issue.
6: Name Officers
- The officers are appointed by the board of directors. Most states require that there be a president and a secretary (although some also require a treasurer). Furthermore, the vast majority of states allow the same person to serve as both the president and secretary.
7: Tax Identification Number / S Election
- A federal tax identification number is obtained from the IRS through filing of Form SS-4. Here is a link to the instructions for filing Form SS-4. Note: The IRS now has an online SS4 application system for immediately obtaining an FEIN.
- If your corporation intends to elect Subchapter S status to be taxed as a partnership, then you must file IRS Form 2553. Here is a link to the instructions for filing Form 2553. An S election may be filed during the entire taxable year before the year in which the election is to be effective and before the 16th day of the third month of the current taxable year. An election that is ineffective because of late filing is automatically effective in the following year. Please consult with you tax professional regarding the advisability and mechanics of an S election.
- Please note: In the State of Louisiana only, incorporators are required to obtain a federal tax i.d. number prior to filing the articles of incorporation.
8: Issuing Stock to the Shareholders
- It is important that share certificates be issued to the shareholders as soon as possible after the corporation has been formally incorporated under state law. Share certificates evidence ownership in the corporation and fulfill a legal requirement under the corporate laws of most states. The following are the steps necessary for issuance of share certificates:
- Board of Director resolution authorizing sale of specific number of shares at a specific price, see sample.
- Bill of sale between corporation and shareholder evidencing payment of the share price stated in the board of directors resolution.
- Issuance of share certificates to each shareholder.
The following is a link to Arizona's corporate statute relative to issuance of shares which is representative of the corporate laws of most states on the matter.
9: Shareholders Agreeements
- This is an optional step in the process. For LLCs and partnerships, the operating or partnership agreement will often include language that restricts the sale of a member or partner's interest when that individual leaves the business. These are called restrictive covenants. Corporate bylaws and board of director resolutions do not, in most circumstances, touch on these issues. The common method for restricting stock transfers outside of the existing shareholders of a corporation is through a separate document called a shareholder buy-sell agreement. MedLawPlus.com® does not currently offer this document.
Note: Here is a link to information regarding informal action by the board of directors through unanimous consent.
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