Filing certificate of Incorporation

After you’ve chosen a name for your business and appointed your directors, you must prepare and file “certificate of incorporation” with your state’s corporate filing office. Typically, this is the Department or Secretary of State’s office, located in your state’s capital city. While most states use the term “articles of incorporation” to refer to the basic document creating the corporation, some states (including Connecticut, Delaware, New York and Oklahoma) use the term “certificate of incorporation.” A few other states (Louisiana, Massachusetts and New Jersey) call the document “articles of organization,” while Washington calls it a “certificate of formation,” and Tennessee calls it a “charter.”

No state requires a corporation to have more than one owner. For single-owner corporations, the sole owner simply prepares signs and files the articles of incorporation himself. For co-owned corporations, generally, all of the owners may sign the articles, or they can appoint just one person to sign them. Whoever signs the articles is called the “incorporator” or “promoter.”

Drafting Corporate Bylaws

Bylaws are the internal rules that govern the day-to-day operations 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.

Holding a First Meeting of the Board of Directors

After the owners appoint directors, file articles of incorporation and create bylaws, the directors must hold an initial board meeting to see to a few corporate formalities and make some important decisions. At this meeting, directors usually:

·         Set the corporation’s fiscal or accounting year

·         Appoint corporate officers

·         Adopt the corporate bylaws

·         Authorize the issuance of shares of stock, and

·         Adopt an official stock certificate form and corporate seal.

Additionally, if the corporation will be an S corporation, the directors should approve the election of S corporation status.

You should not do business as a corporation until you have issued shares of stock. Issuing shares formally divides ownership interests in the business. It also fulfills a substantial requirement of the incorporation process—and you must act like a corporation at all times to qualify for the legal protections offered by corporate status.

Securities Registration

Issuing stock can be complicated; it must be accomplished in accordance with securities laws. This means that large corporations must register the stock issuance with the federal Securities and Exchange Commission (SEC) and the state securities agency. Registration takes time and typically involves extra legal and accounting fees.

Exemptions to Securities Registration

Fortunately, most small corporations qualify for exemptions from securities registration. For example, SEC rules do not require a corporation to register a “private offering”—that is, a non-advertised sale to a limited number of people (generally 35 or fewer) or to those who can reasonably be expected to take care of themselves because of their net worth or income earning capacity. Moreover, most states have enacted their own versions of this SEC exemption. In short, if your corporation will issue shares to a small number of people (generally ten or less) who will actively participate in running the business, it will certainly qualify for exemptions to securities registration.

Issuing the Shares

When you’re ready to issue the actual shares, you’ll need to document the following:

·         The names of the initial shareholders

·         The number of shares each shareholder will buy, and how each shareholder will pay for his or her shares.

Finally, you’ll prepare and issue the stock certificates. In some states you may also have to file a “notice of stock transaction” or similar form with your state corporations office.

Obtaining Licenses and Permits

After you’ve filed your articles, created your bylaws, held your first directors’ meeting and issued stock, you’re almost ready to go. However, you still need to obtain the required licenses and permits that anyone needs to start a new business, such as applying for a business license (also known as a tax registration certificate). You may also have to obtain an employer identification number from the IRS, a seller’s permit from your state or a zoning permit from your local planning board.