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Forming a Corporation: Articles of Incorporation & Bylaws

One of the first formal steps which needs to be taken by anyone starting their business as a corporation is the filing of a special document with a particular office within their state, called “articles of incorporation”. Also in most states, the articles of incorporation must be filed with the Secretary of State’s office, though some states may have differing names for both the document and the place where it must be filed. Despite the possible differences in name, nearly every state offers a downloadable form of the documents, which include the state’s minimum requirements for such documents. See our article for more specific information on forming a New Mexico corporation. Though state requirements differ slightly, the majority of states require several, if not all, of the following types of information:

  • the name of the corporation;
  • the location of the corporation’s principal place of business;
  • the name and address of a registered agent of the corporation;
  • a statement of the purpose of the corporation;
  • the duration for which the corporation is to last, if such a specification is applicable;
  • information about the stock authorized for issue by the corporation, including the number of shares and the classes of stock;;
  • names and addresses of the owners of the corporation, or the initial officers and directors;
  • the signatures of one or more of the incorporators;

The Name of the Corporation

Though this requirement may seem simple, some effort must be expended before deciding on a name for your corporation to determine whether the name is available, and therefore will not infringe on the trademark rights of another corporation. For example, if you attempt to file articles of incorporation which specify your business name as “The Muddy Cup” coffee shop, and there is already a business within your state using that name, your articles of incorporation will be rejected and your business will not be incorporated. To avoid this, you should do a thorough search of names of registered businesses within your state. Generally, this is a simple task which can be done online, using your Secretary of State’s website.

Your Corporation’s Principal Place of Business

Articles and BylawsThe “principle place of business” of your corporation is the main location for your business. This is easy to discern for most small businesses, which are primarily or wholly located in one space or office. However, this can be more difficult if your various aspects of your business are taking place in different locations. Typically, the location where the day-to-day business and management takes place is the corporation’s principle place of business. When filling out articles of incorporation, you may be made to provide a street address, though not all states require such detailed information. This is simply the main location for your business. For many small businesses, it will be the one and only business location. You may be specifically required to provide a street address. Some states actually do not require any business address information.

Naming a Registered Agent

A “registered agent” is a person selected by you to receive any official papers which may be directed to the corporation, including certain state notices and legal documents. The agent must be in the state where the corporation is formed, and on the articles of incorporation, you must give a physical address for the registered agent. You are free to select an officer of your corporation to serve as a registered agent, and in that case, the agent’s address would simply be the address of the corporation’s primary place of business. Otherwise, you can appoint a separate individual who is not part of the corporation, such as an attorney, to act as a registered agent of your corporation

Statement of the Corporation’s Purpose

The majority of states do not demand a very specific statement of a corporation’s purpose, and in general, it is better not to offer one up. Instead, providing a general statement like “The corporation’s purpose is to engage in any lawful activity for which a corporation may be incorporated in this state” is good enough. In some states, this sort of statement may even be pre-printed on the articles of incorporation. If you do incorporate in a state that demands more specificity, you should still attempt to be as general as possible in your statement of purpose. If for example, you are starting a business that you initially expect will focus on interior decorating, you may be wise to include a statement such as “to provide interior design and decoration services and engage in any additional lawful activity for which a corporation may be incorporated in this state.” Therefore, if you later decide to expand your business to offer event planning, you may do so without issue.

Duration of the Corporation, If Applicable

This refers to the length of time you plan to operate your incorporation, if there is in fact a fixed amount of time. Not all states require such information, and the ones who do not require that you specify a certain time period. Instead, if you are unsure of how long your business venture will last, you may state that the duration of the corporation is to be “perpetual.” In some states, if you fail to provide a duration specification, it will be assumed that your corporation’s duration will be perpetual.

Authorized Stock Shares and Classes

Virtually all states require that  you specify how many shares of stock your corporation will be authorized to issue, and many states also require that you indicate what classes of stock will be issued by your corporation. You should keep in mind that the number of authorized shares is not the same as the number of shares issued, and that you may choose to issue a greater number of shares than those initially issued to the corporation’s shareholders. In deciding how many shares you should authorize, be mindful that in several states the cost of filing your articles of incorporation may in part be influenced by the number of shares you authorize. For small business, it usually makes sense to authorize only the number of shares that will lead a minimum filing fee. So, if your state caps the minimum filing fee at 20,000 authorized shares, it will likely be unnecessary to authorize any more shares than 20,000. You can always authorize more shares later on, if it becomes necessary.

A specification of the classes of stock the corporation will issue typically relates to what rights different groups of shareholders (if there will be different groups) will have with regard to the corporation and their shares of stock. If you anticipate that you will have a more complicated arrangement however, one in which shareholders have voting rights on mergers or are entitled to receive dividends for example, then you would benefit from consulting a business lawyer or some other expert before settling on share classes.

Incorporator’s/Officer’s/Director’s Names and Addresses

An incorporator is the person or people responsible for the incorporation of a business, and is not necessarily an officer or director of the company. The majority of states demand the name and address of at least one incorporator, but some states alternatively allow you to provide the names and addresses of the corporation’s officers or directors. For a large number of small businesses, there will only be one incorporator, but when there are multiple incorporators, each one is usually required to provide his or her signature on the articles of incorporation.

Authorized Signatures of Incorporators

As mentioned directly above, usually at least one of the incorporators must provide a signature on the articles of incorporation. If there is more than one incorporator, they usually must each provide a signature and their address.

Generally, filing fees for articles of incorporation differ among states, and can range anywhere from $100 to $1000. However, the majority of states impose filing fees closer to the $100 mark. To figure out exactly what you will owe when you file articles of incorporation in your state, you can check with the Secretary of State’s Office.

Bylaws

In addition to filing articles of incorporation, you will also need to draft corporate bylaws as part of the corporation start-up process. Corporate bylaws are an official statement of the rules that will govern the corporation internally, including the everyday operations of the business. The bylaws may specify things like when and where the corporation’s board of directors will meet, when and where its shareholders will meet, and what the voting requirement and rights are for each type of meeting. In creating bylaws, you may choose to either consult a self-help resource, or employ the assistance of an experienced business planning attorney who is familiar with the corporate laws of your state. Generally, corporate bylaws will be adopted by the corporation’s board of directors at the first board meeting.

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