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.
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.