Top 8 Corporation Questions

How does an individual form a corporation?

One or more natural persons or corporations may act as incorporators of a corporation by signing and filing Articles of Incorporation with the designated state government official (usually the Secretary of State).  These Articles are often filed in duplicate, and the Secretary of State, when satisfied that the Articles conform to the State’s corporation statutes, stamps filed and the date on each copy.  The Secretary of State then retains one copy and returns the other copy, along with a filing fee receipt, to the corporation.

What information must the Articles of Incorporation contain?

The articles of incorporation must contain:

  • The name of the corporation;
  • The number of shares of stock the corporation is authorized to issue;
  • The street address of the corporation’s initial registered office and the name of its initial registered agent; and
  • The name and address of each incorporator.

The Articles may contain optional provisions such as the purpose for which the corporation is organized.  However, if the Articles contain no purpose clause, the corporation will automatically have the purpose of engaging in any lawful business.  Also, if no reference is made to the duration of the corporation in the Articles, it will automatically have a perpetual duration.

What are bylaws of a corporation?

The bylaws of a corporation are the internal rules and guidelines for the day-to-day operation of a corporation, such as when and where the corporation will hold directors’ and shareholders’ meetings and what the shareholders’ and directors’ voting requirements are.  Typically, the bylaws are adopted by the corporation’s directors at their first board meeting. They may specify the rights and duties of the officers, shareholders and directors, and may deal, for example, with how the company may enter into contracts, transfer shares, hold meetings, pay dividends and make amendments to corporate documents.  They generally will identify a fiscal year for the corporation.

What is a close corporation?

A corporation whose shares are held by a single shareholder or a closely-knit group of shareholders (such as a family) is known as a close corporation. The shares of stock are not traded publicly.  Many of these types of corporations are small firms that in the past would have been operated as a sole proprietorship or partnership, but have been incorporated in order to obtain the advantages of limited liability or a tax benefit or both.

What is a professional corporation?

A corporation may be organized for the business of conducting a profession.  These are known as professional corporations. Doctors, attorneys, engineers, and CPAs are the types of profes­sionals who may form a professional corporation.  Usually there is a designation P.A. or P.C. after the corporate name in order to show that this is a professional association or professional corporation.

What is a non-profit corporation?

A nonprofit corporation is one that is organized for chari­table or benevolent purposes.  These corporations include certain hospitals, universities, churches, and other religious organizations.  A nonprofit entity does not have to be a nonprofit corporation, however.  Nonprofit corporations do not have shareholders, but have members or a perpetual board of directors or board of trustees.

What is a Subchapter S corporation?

A Subchapter S corporation is a corporation in which the shareholders elect to be treated as partners for income tax purposes.  Shareholders still have limited liability protection of a corporation, but income is treated like partnership income.  Subchapter S refers to a particular subdivision of the Internal Revenue Code.  The number of shareholders is limited and neither corporations nor partnerships can be shareholders in a Subchapter S corporation.  Also, shareholders must be U.S. citizens or resident aliens.

What is the registered agent of a corporation?

The registered agent is the “mailbox” for the corporation.  He or she is the person or entity designated by the corporation to receive any documents regarding a lawsuit against the corporation or other official communications.  Many corporations use their attorney or a professional corporate service company for this service.  The registered agent’s address must generally be a street address in the subject state and the agent must be located at that address.  A post office box generally may not be used as the registered agent address.

 

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