Chapter Eight Formation of Corporations

Things to consider when forming a corporation include:  Preincorporation activities by promoters  Selection of jurisdiction in which to incorporate  The corporate name  Articles of incorporation  Post-incorporation activities: bylaws, corporate supplies, organizational meetings

What is a Promoter Promoter: Promoter: One involved in forming a corporation and organizing its structure (also called incorporator)

The Corporate Name  Promoters must select a name for the new legal “person” or entity they are creating  Determine if name is available in the state of incorporation  Reserve the name for the prospective corporation while articles of incorporation are being prepared  Register the name, to reserve it in a foreign jurisdiction  Apply for any assumed names

Elements of Articles of Incorporation  Name  Address  Agent for service of process  Purposes  Description of stock  Incorporators

Information Needed to Prepare Articles of Incorporation  Determine the identity of incorporators  Determine the principal address of corporation within the state of incorporation  Identify registered agent  Identify initial shareholders  Identify initial directors  Identify stock of company  Common or preferred stock  Number of authorized shares  Par value or no par value

Agenda for First Organizational Meeting Slide 1 of 2  Election of directors  Appointment of officers  Adoption of bylaws  Acceptance of preincorporation stock subscriptions  Acceptance of preincorporation contracts  Approval of corporate seal and form of stock certificate

Agenda for First Organizational Meeting Slide 2 of 2  Banking and accounting information  S Election  Confirmation of Section 1244 stock  Issuance of stock

Key Features in Forming Corporations Slide 1 of 3  Corporations are planned and organized by promoters. Agreements made by promoters bind the promoters personally until they are released from liability thereon.  Interested investors often offer or subscribe to purchase stock when the corporation is later formed. The offer is irrevocable for some period of time.  Consideration should be given as to the jurisdiction in which to incorporate. Some states have laws that are more flexible and permissive than others.

Key Features in Forming Corporations Slide 2 of 3  The corporate name must usually include a signal showing the entity is a corporation. The name should be reserved prior to incorporation.  The document that creates a corporation is called the articles of incorporation. It must comply with state statutes.  Bylaws must be prepared for the corporation. Bylaws provide internal rules for the operation of a corporation.

Key Features in Forming Corporations Slide 3 of 3  Corporations must hold a first or organizational meeting to commence the corporation’s business.