Chapter Eight

Formation of Corporations

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

PromoterPromoter: : 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

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Banking and accounting information S Election Confirmation of Section 1244 stock Issuance of stock

Key Features in Forming Corporations

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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.