Gathering and maintaining files containing
legally required information is a very important step in starting
a business. It will help you avoid getting into trouble later
(if you need proof or record of your actions) and could save
you a lot of time if you need to gather information for tax
or other official purposes.
The documents that need to be submitted initially are called
the articles of incorporation. Though the basic type of certificate
of incorporation is the same across the U.S., every state
has its own extra requirements, especially regarding fees. Here is the basic information
required for incorporation:
The name of the company.
This will typically have a suffix such as “Corporation”
or “Inc” or “Company”, which
is legally required. Before you commit to choosing
a company name, you may wish to check whether this
name is being used already in the state. If it is,
you’ll probably have to choose another, as using
the same name as a concurrently trading company could
render you liable to legal action from that company.
Whatever name you choose, the state has the final
authority to decide if the name is available and whether
it will grant it to you. If it deems the name to be
too similar to the name of another company, it has
the power to decide not to grant it.
The purpose of the business.
The role of the company is to provide certain products
or services, and the state requires you to give an
explanation of the nature of the business to it. It
comes under two basic categories:
General business: This denotes a company that is engaged
in various business activities, rather than in providing
one product or service.
Specific business: Some states will not accept general
answers and they are more specific about the requirements.
They ask what the exact business is and what is the
range of products or services are carried out.
The registered agent. This
is the information regarding a registered agent who
deals with the receipt of legal and tax documents
for the corporation. Almost all states require a business
to have a registered agent before they will allow
the incorporation of the business. The agent must
possess a physical address in the concerned state
and should be available during business hours. What
the agent receives is the taxation documents and any
litigation notice that initiates a lawsuit. To ensure
that your documents are handled professionally, retaining
the services of a registered agent is an absolute
necessity.
The incorporator. The state
requires information about the individual or company
that prepares and files the formation documents with
the state – also called an incorporator. His
or her name, signature and address are necessary information
to be included in the formation documents.
The authorized stock shares.
However small your corporation is, it must possess
a share of stock, and the state must know how much
stock you want to authorize for the company. This
establishes your ownership of the company. If you’re
thinking of adding extra owners at a later date, it’s
better to keep some stock un-issued. This also increases
the ownership percentage for the existing shareholder.
The minimum stated value
of each share (also termed the share par value), is
information also required by the state. This doesn’t
depict the actual share value. For public corporations,
the actual value of the share is based on the price
that investors are willing to pay on a national exchange
for each share – and that’s determined
according to the perceived value of the company, and
the price can rise and fall at any time. The exception
to this is in the case of a private company, where
the over-all value of the corporation decides the
actual value of a share.
The authorization of preferred
shares. Information about common and preferred shares’
authorization and voting rights’ information
must be included in the articles of incorporation.
If the company ceases to function, preferential payments
of dividends or distribution of assets is carried
out in the case of the preferred shares.
Directors’ information.
The names and addresses of the directors of the corporation
must be included in the formation documents. They
are responsible for all the company affairs including
major decisions. They appoint the officers to look
into day-to-day business activities. However, shareholders
elect the directors.
The Officers’ information.
Only a few states insist on this information. These
Officers are President, Secretary and Treasurer, and
they carry on the day-to-day activities of the company.
The principal address of
the company. In a few states, it is mandatory to supply
information regarding the legal address of the company.
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