Summary
If you are the owner manager of a small business you may have been wondering about the advisability of incorporating your business, particularly if you are seeking equity capital.
This Aid does not discuss the advantages and disadvantages of the corporate form; its purpose is to acquaint you with some of the basic steps involved once you have decided to incorporate.
This Aid is not to be considered a substitute for professional advice. Legal guidance will insure that (a) the articles of incorporation and the bylaws are tailored to the needs of your particular business enterprise, (b) you understand the various aspects of the tax obligations involved, and (c) you will be in compliance with the State, Vocal, and Federal laws affecting the corporation.
Laws governing the procedure for obtaining a corporate charter vary among States. Detailed information about the requirements of your State can be obtained from the secretary or other official designated to supervise the granting of corporate charters.
Choosing the Location
The majority of small and medium sized businesses, especially those whose trade is local in nature, find it advisable to obtain their charter from the State in which the greatest part of their business is conducted.
Out of State, or "foreign," incorporation often results in the additional payments of taxes and fees in another jurisdiction. Moreover, under the laws of many States the property of a foreign corporation is subject to less favorable treatment, especially in the area of attachment of corporate assets. This legal difference could prove especially hazardous to a small business.
On the other hand, you should look into possible benefits to be gained from incorporation in another State. Such factors as State taxes, restrictions on corporate powers and lines of business in which a company may engage, capital requirements, restrictions upon foreign corporations in your State, and so forth should be taken into consideration in selecting the State of incorporation. For example, you should be aware that some States require a foreign corporation to obtain a certificate to do business in their State. Without such certification the corporation may be deprived of the right to sue in those States.
The fee or organization tax charged for incorporation varies ~greatly from State to State.
Certificate Of Incorporation
Generally. the first step in the required procedure is preparation, by the incorporators, of a "certificate of incorporation." Most States used to require that the certificate be prepared by three or more legally qualified persons, but the modern trend is to require only one incorporator. An incorporator may, but not necessarily must, be an individual who will ultimately own stock in the corporation.
For purposes of expediting the filing of articles, "dummy" incorporators are often employed. These dummy incorporators are usually associated with a company that performs this service or with an attorney for the organizers. They typically elect their successors and resign at the meeting of the incorporators.
Many States have a standard certificate of incorporation form which may be used by small businesses. Copies of this form may be obtained from the designated State official who grants charters and, in some States. from local stationers as well. The following information is usually required:
1. The corporate name of the company. Legal requirements generally are (a) that the name chosen must not be so similar to the name of any other corporation authorized to do business in the State and (b) that the name chosen must not be deceptive so as to mislead the public. In order to be sure that the name you select is suitable. check out the availability of the name through the designated State official in each State in which you intend to do business before drawing up a certificate of incorporation. This check can be made through a service company. In some States, there is a procedure for reserving a name.
2. Purposes for which the corporation is formed. Several States permit very broad language, such as "the purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized." How ever, most States require more specific language in setting forth the purposes of the corporation. Even where State law does not require it, the better practice is to employ a "specific object" clause which spells out in broad descrip tive terms the projected business enterprise. At the same time take care to allow for the possibility of territorial. market, or product expansion. In other words, the lan guage should be broad enough to allow for expansion and
yet specific enough to convey a clear idea of the projected enterprise.
The use of a specific object clause. even where not required by State law, is advisable for several reasons. It will convey to financial institutions a clearer picture of the corporate enterprise and will prevent problems in qualifying the corporation to do business in other jurisdic tions. Reference books or certificates of existing corpora tions can provide examples of such clauses.
3. Length of time for which the corporation is being formed. This may be a period of years or may be perpet ual.
4. Names and addresses of incorporators. In certain States one or more of the incorporators is required to be a resident of the State within which the corporation is being organized.
5. Location of the registered office of the corporation in the State of incorporation. If you decide to obtain your charter from another State, you will be required to have an office there. However, instead of establishing an of fice, you may appoint an agent in that State to act for you. The agent will be required only to represent the corpora tion, to maintain a duplicate list of stockholders, and to receive or reply to suits brought against the corporation in the State of incorporation.
6. Maximum amount and type of capital stock which the corporation wishers authorization to issue. The proposed capital structure of the corporation should be set forth, including the number and classification of shares and the rights, preferences, and limitations of each class of stock.
7. Capital required at time of incorporation. Some States require that a specified percentage of the par value of the capital stock be paid in cash and banked to the credit of the corporation before the certificate of incorporation is submitted to the designated State official for approval.
8. Provisions for preemptive rights, if any, to be granted to the stockholders and restrictions, if any, on the transfer of shares.
9. Provisions for regulation of the internal affairs of the corporation.
10. Names and addresses of person who will serve as directors until the first meeting of stockholders or until their successors are elected and qualify.
11. The right to amend, alter, or repeal any provisions
contained in the certificate of incorporation. This right is generally statutory, reserved to a majority or two thirds of the stockholders. Still, it is customary to make it clear in the certificate.
If the designated State official determines that the name of the proposed corporation is satisfactory. that the certif icate contains the necessary information and has been properly executed, and that there is nothing in the certifi cate or the corporation's proposed activities that violates State law or public policy, the charter will be issued.
Officers and Stockholders
Next, the stockholders must meet to complete the incor poration process. This meeting is extremelv important. It is usually conducted by an attorney or someone familiar with corporate organizational procedure.
In the meeting the corporate bylaws are adopted and a board of directors is elected. This board of directors in turn will elect the officers who actually will have charge of the operations of the corporation-for example. the president, secretary, and treasurer. In small corporations. members of the board of directors frequently are elected as officers of the corporation.
Bylaws
The bylaws of the corporation may repeat some of the provisions of the charter and State statute but usuallv cover such items as the following:
1. Location of the principal office and other offices of the corporation.
2. Time, place, and required notice of annual and special meetings of stockholders. Also the necessary quorum and voting privileges of the stockholders.
3. Number of directors, their compensation, their term of office, the method of electing them, and the method of creating or filling vacancies on the board of directors.
4. Time and place of the regular and special director's meetings, as well as the notice and quorum requirements.
5. Method of selecting officers, their titles, duties. terms of office, and salaries.
6. Issuance and form of stock certificates, their transfers and their control in the company books.
7. Dividends, when and by whom they may be declared.
8. The fiscal year, the corporate seal, the authority to sign checks, and the preparation of the annual statement.
9. Procedure for amending the bylaws.
Special Tax Laws
At the time of the first meeting of the corporate board of directors and prior to issurance of any shares, you might consider adoption of a plan under a section of the Internal Revenue Code (IRC 1244) that grants ordinary rather than capital treatment of losses on certain "small business stock." Among the requirements of qualification as "sec tion 1244 stock" are (1) the stock must be common stock, (2) the stock must be issued by the corporation for money or other property pursuant to a written plan containing several limitations, and (3) the amount of contribution received for the stock and equity capital of the corpora tion must not exceed maximum dollar limits.
You should be aware, also, of the possibility of electing subchapter S status (IRS 1371 1379). The purpose of .subchapter S is to permit a "small business corporation" to elect to have its income taxed to the shareholders as if the corporation were a partnership. One objective is to overcome the double tax feature of the present system of taxation of corporate income. Another purpose is to permit the shareholders to have the benefit of offsetting business losses by the corporation against the income of the shareholders.
Among the qualifying requirements for electing and main taining "subchapter S" eligibility are that the corporation has no more than 10 shareholders, all of whom are individuals or estates; that there be no nonresident alien shareholders; that there be only one class of outstanding stock; that all shareholders consent to the election; and that a specified portion of the corporation's receipts be derived from actual business activity rather than passive investments. No limit is placed on the size of the corpora tion's income and assets.
If you plan to transfer property to a corporation in exchange for stock, you should realize that such a trans fer is a taxable transaction unless the transfer complies with the provisions of IRC section 351.
Other Considerations
If your business is at present a sole proprietorship or partnership, you will need to secure a new taxpayer identification number and unemployment insurance ac count. You should find out in advance whether present licenses and leases will be transferable to the new corpo rate entity.
SAMPLE ARTICLES OF INCORPORATION
PLUS INSTRUCTIONS
Write or call your state office (see State Requirements for General Business Corporations) requesting incorporating forms, fee schedule and incorporation information. Complete the forms and return them to the state office along with the necessary fees. The state office will record your incorporation and return to you, one copy showing that it has been recorded along with a Certificate of Incorporation or Charter, as the case may be.
The following is a completed copy of Articles of Incorporation for you to use as a model. The forms used to incorporate vary some what from state to state, but most of them are close to this model.
Articles of Incorporation
Theundersignednaturalperson(s~oftheageofeighteenyearsormoreforthepurposeofformingacorporationunderThe General and Business Corporation Law of adopt the following Articles of Incorporation:
ARTICLE ONE
The nameof thecorporation is: John Doe Mail Order, Inc.
ARTICLE TWO
The address. including street and number. if any, of the corporation's initial registered office in this state is:
1112 Main Street, AnY Town, USA OOOOO
and the name of its initial agent at such address is: John Doe
ARTICLE THREE
The aggregate number. ciass anci par ~alue. if any, of shares ~ hich the corporation shall ha~e authorit~ is issue shall be:
The aggregate number of shares of stock which the corporation shall have authority to issue is 1,000 with the class of stock being common with no par value.
ARTICLE ONE: Here fill in the name of your corporation.
ARTICLE TWO: Here give the street address of the corporations registered o~rice along with the name of the corporations initial agent. The initial agent is the person upon whom any process, notice or demand required or permitted by law may be served for the corporation.
ARTICLE THREE: The first paragraph of Article Three requests the number, cLass and par value of the shares of stock that the corporation shall issue.
Number: It is best to issue the maximum number of shares of stock that will give you the lowest incorporating fee. Since incorporating fees vary from state to state, it is best to check with your state to find out the exact number of shares of stock to issue that will give you the lowest incorporating fee. In the example, we have used 1,000 shares, this is about the average number.
Class: The two most widely used classes of shares of stock are common stock and preferred stock. Common stock is the voting stock of the corporation. Preferred stock usually does not have any voting privileges but is given some preference over common stock, such as, "will be paid a dividend of so many dollars per share before the common stock can receive any dividends." Most small corporations issue only common stock.
Par Value: The value of a share of stock can vary, depending on the overall worth of the corporation, so the "par value' of the share of stock becomes misleading and unimportant. A stock certificate with "Par Value $100.00 Per Share" printed on it could be worth 10› per share, or it could be worth $10,000.00 per share depending on the financial condition of the corporation at the time of the sale. The same holds true for a stock certificate printed "No Par Value."
It is usually best for a small corporation to issue no par value stock, since it requires less paper work.
The second paragraph of Article Three is for corporations who are issuing different classes of stock. Since your corporation will be a small one, at least in the begining, just write the word "none" in this space.
ARTICLE ONE: Here fill in the name of your corporation.
ARTICLE TWO: Here give the street address of the corporations registered o~rice along with the name of the corporations initial agent. The initial agent is the person upon whom any process, notice or demand required or permitted by law may be served for the corporation.
ARTICLE THREE: The first paragraph of Article Three requests the number, cLass and par value of the shares of stock that the corporation shall issue.
Number: It is best to issue the maximum number of shares of stock that will give you the lowest incorporating fee. Since incorporating fees vary from state to state, it is best to check with your state to find out the exact number of shares of stock to issue that will give you the lowest incorporating fee. In the example, we have used 1,000 shares, this is about the average number.
Class: The two most widely used classes of shares of stock are common stock and preferred stock. Common stock is the voting stock of the corporation. Preferred stock usually does not have any voting privileges but is given some preference over common stock, such as, "will be paid a dividend of so many dollars per share before the common stock can receive any dividends." Most small corporations issue only common stock.
Par Value: The value of a share of stock can vary, depending on the overall worth of the corporation, so the "par value' of the share of stock becomes misleading and unimportant. A stock certificate with "Par Value $100.00 Per Share" printed on it could be worth 10› per share, or it could be worth $10,000.00 per share depending on the financial condition of the corporation at the time of the sale. The same holds true for a stock certificate printed "No Par Value."
It is usually best for a small corporation to issue no par value stock, since it requires less paper work.
The second paragraph of Article Three is for corporations who are issuing different classes of stock. Since your corporation will be a small one, at least in the begining, just write the word "none" in this space.
The preferences. qualifications. Iimitations. restrictions. and the special or relative rights. including convertible rights. if any, in respect of the shares of each class are as follows:
ARTICLE FOUR
The e.~;lent. if an~. ~o ~ hich the preemD~l~e right of a sharehoider to acquire aaciitionai shares is iimited or uenie(i.
!~ONE
ARTICLE FIVE
The name and place of residence of each incorpora~or is as follows:
John Doe
Jane Doe
Jean Doe
Street
1112 Main Street
1112 Main Street
2221 First Street
ARTICLE SIX
~City,,
Any Town,USA 00000
Any Town,USA 00000
Any Town,USA 00000
The number ot directors to constitute the first board of directors is three (3~ . Thereafter the number or directors .hall be fi~ed b! . or in the manner provicied in the b laws. Any changes in the number ill be reported to the Secretary oi State w ithin thirt~ caiendar da~s of such change.
ARTICLE SEVEN
The duration of the corporation j5 Perpetual
ARTICLE EIGHT
The corporation is formed for the following purposes:
To carry on any and all of a mail order business and all other legal acts permitted general and business corporations.
'IT~ESS ~'HEREOF. these .Articles of Incorporation have been signed this _
ARTICLE FOUR: Deals with the stockholders rights to acquire additional shares of stock in the corporation. Since most small corporations issue common stock and the rights of a stockholder to acquire additional shares of stock are granted by law in most states, just insert the word "none".
ARTICLE FIVE: Here fill in the name and complete address of each incorporator.
ARTICLE SIX: Requests the number of directors that will make up the first board of directors. In our example, we have used three (3) directors, which is the minimum number in some states. If your state requires more than one (1) director, you can use your spouse, family member or a close friend as the other directors.
ARTICLE SEVEN: Asks the duration of the corporation. Except for the State of Mississippi which is 99 years, all the states allow perpetual duration to all corporations. Insert the word "perpetual" or the number of years you wish the corporation to exist.
ARTICLE EIGHT: Asks the purpose for which the corporation is organized. Most states give broad general powers to corporations, therefore, list the specific purpose for which the corporation is being organized, such as, "to carry on any and all of a mail order business and all other legal acts permitted general and business corporations." This statement also applies to any other type of business you might want to incorporate.
BY LAW S
OF
ARTICLE I OFFICES
Section 1 Principal Office:
The principal office of the corporation shall be located and maintained in the city of in the count~ of
Section 2 Other Offices:
in the state of
The corporation may also have other offices, as determined by the Board of Directors, either within or without the state of and either within or without the United States.
ARTICLE II MEETING OF STOCKHOLDERS
Section 1 Annual MeetinPs:
The annual meeting of the stockholders for the purpose of electing directors of the corporation, and for any other business as may properly come before the meeting, shall be held within five months of the close of the fiscal year of the corporation.
Section 2 SDecial Meetings:
Special meetings of the stockholders for any purpose as stated in the notice may be called at any time by the Board of Directors, or by the President of the corporation. At written request of a majority of the stockholders entitled to vote, special meetings shall be called by the President or the Secretary.
Section 3 Place of Meetings:
All meetings of stockholders of the corporation shall be held at the principal office of the corporation or at any other place as stated in the notices of such meetings as may be determined by the Board of Directors.
Section 4 Notice of meetings:
(a) Written notice of each meeting, stating the place where, the date and time when said meeting is to be held, shall be given each stockholder entitled to vote at such meeting whether annual or special, not less than ten days or more than fifty days before such meeting is to be held. Notice of such meetings, whether annual or special, shall also state the general nature for which the meeting is called.
(b) Notices of all meetings shall be written or printed and delivered either personally or by mail to the stockholders address as it appears on the records of the corporation. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail in a sealed envelope with prepaid postage affixed thereon.
Section 5 Quorum:
Execpt as otherwise mandatory by law, or by the Articles of Incorpo ration, or as otherwise provided by these By Laws, at any and all annual or special meetings of the stockholders of the corporation, the presence, either in person or by proxy, of stockholders holding a majority amount of the stock of the corporation, who are entitled to vote at such meeting, shall constitute a quorum for the purpose of transacting any business. At any annual or special meeting of stockholders, a quorum has not been established, the stockholders entitled to vote at such meeting, by a majority vote, may adjourn such meeting by an announcement at the meeting. At any such adjourned meeting at which a quorum has been established, the stockholders may validly proceed to transact any business which might have been trans acted at the meeting originally noticed.
Section 6 Voting:
(a) Subject to and in accordance with the Articles of Incorporation, these By Laws, or by statute, each stockholder entitled to vote, shall be entitled to one vote for each share of stock held by such stock holder.
(b) Each stockholder entitled to vote at any meeting, may vote by proxy, when submitted in writing of such stockholder wishing to do so.
(c) No proxy shall be voted after eleven months from the date of its implementation, unless otherwise stated for a longer peroid of time.
(d) ~11 corporate action to be voted on, shall be decided by a majority of the votes cast.
Section 7 tockholder List:
The officer in charge of the stock ledger for the corporation shall make a full list of all stockholders entitled to vote at corporation meetings. Said officer shall set in order alphabet ically, each stockholders name, address and the number of shares of stock held by each. The stockholder list shall be completed and open for examination ten days before meetings. Any stockhold wanting to look over the stockholder list may do so during normal business hours at the principal office of the corporation, or at such other place or places where said meeting is to be held. The stockholder list shall be kept open and available for inspec tion by stockholders at such meetings for the entire time of the meetings.
Section 8 Action Without Meeting:
Any corporate action which may be taken at a meeting requiring the vote of stockholders at a meeting thereof, may be taken without a meeting, if all the stockholders entitled to vote on the subject matter if such meeting were held, shall consent in writing to the action being taken.
ARTICLE III BOARD OF DIRECTORS
Section 1 Number Election and Term:
(a) The number of directors of the corporation shall be as determined by a majority vote of the full Board of Directors. The number of directors may not be less than three, unless all the shares of stock of the corporation are owned beneficially and of
_____ by either one or two stockholders, then the number of direct may not be less than the number of stockholders.
(b) Each director shall be elected at the annual meeting of the stockholders by a majority vote of stockholders entitled to vote thereat, either in person or by proxy.
ors
(c) Each director shall serve office until the next annual meeting of stockholders for the purpose of electing directors, and shall serve until such directors successor shall be elected and qualified, or until any such directors death, resignation or removal from office.
Section 2 General Powers:
Ihe Board of Directors shall be responsible for the business and affairs of the corporation.
Eection 3 Chairman:
Ihe Chairman of the Board of Directors, provided one is elected, shall preside at all the meetings of the Board of Directors and shall have such powers and duties as generally pertain to his respective office.
Section 4 Annual and Re~ular Meetings:
(a) The Annual meeting of the Board of Directors of the corpora tion shall be held immediately after the annual meeting of the stockholders, at the same place of the annual stockholders meeting.
(b) The Board of Directors, shall from time to time hold other regular meetings and may provide by resolution, the time and place for the holding of such meeting thereof.
Section 5 Special meetings:
Special meetings of the Board of Directors may be called by the President, or at the request of any one or more of the Directors of the corporation. The time and place of such special meeting shall be specified in the notices of such meeting thereof.
Section 6 Notice of Meetings:
(a) Annual meetings of the Board of Directors shall be held without any other notice than this By Law.
(b) Notice shall be given at least five days before any special meeting of the Board is to be held, to each Director of the corpo ration. If the place of such special meeting held is designated outside the state of , days notice shall be given.
:~n ~ ; t; nn~l f;~T~
(c) Written notice of any such special meeting shall be delivered personally or mailed to each Director at his address as it appears on the records of the corporation. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail in a sealed envelope with prepaid postage affixed thereon.
Section 7 Quorum and Adjournments
.
At meetings of the Board of Directors, the presence of a majori of Directors shall constitute a quorum, for the transaction of business. If less than a majority of directors are present at said meeting, a majority of Directors present may adjourn such meeting by an announcement at the meeting.
Section 8 Manner of Actions:
At any meeting of the Board of Directors where a quorum has been established, the act of the majority of the Directors present at such meeting, shall be the act of the Board of Directors.
Section 9 Vacancies:
If the position of any Director becomes vacant for any reason, the remaining Directors by a majority, though less than a quorum, may fill such vacancy or vacancies by appointment of such qualified person or persons to fill the vacant position for the unexpiried term and until the next annual meeting of the stockholders for the purpose of electing directors of the corporation.
Section 10 ResiPnations:
~ny director or officer may resign at any time. Written notice of any resignation must be given to the Board of Directors, the President, or the Secretary of the corporation. Any such resigna tion shall take effect at the time of receipt by the Board of Directors, the President, or the Secretary, and acceptance of such resignation shall not be necessary to make it effective.
The removal of any director may be done with or without cause and at any time by a majority vote of the stockholders entitled to vote at a special meeting called for that purpose.
Section 12 ComDensation:
Stated compensation shall not be received by any director for their services, but by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board of Directors, provided however, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor.
ARTICLE IV OFFICERS
Section 1 Number and Qualifications:
(a) The corporation shall have such officers consisting of a President, a Secretary and a Ireasurer. The Board of Directors may also elect such other officers including a Chairman of the Board, one or more Vice Presidents, Assistant Secretaries, and Assistant Treasurers as it may from time to time deem necessary for the operation of the corporation.
(b) riith the exception of the office of the Chairman of the Board of Directors, any other officer may be, but need not be, a director of the corporation, and the same person may hold two or more offices.
Section 2 Election and Term:
(a) The officers of the corporation shall be elected by the Board of Directors at the first regular meeting of the Board after each annual meeting of the stockholders.
(b) Each officer shall hold office until his successor has been duly elected and has qualified, or until his death, resignation or removal from office.
Section 3 Removal:
The Board of Directors, by a majority vote may remove any officer of the corporation, either with or without cause and elect a successor to fill the position of any officer who has been removed.
The Board of Directors, by a majority vote, may fill a vacancy in any office due to a death, resignation, removal, disqualification or any other reason for the unexpired portion of the term.
Section 5 President:
The President shall be the chief executive officer of the corpo ration and shall supervise, control and manage the general business operations of the corporation. The President shall preside at all meetings of the stockholders, and in the absence of the Chairman of the Board he shall preside at all meetings of the Board of Directors. The President, along with any other officer authorized by the Board of Directors, shall sign documents in behalf of the corporation and shall have and perform such other duties as may be determined by the Board of Directors.
Section 6 Vice Presidents:
Each Vice President shall perform such duties as may be prescribed and given to him as from time to time shall be assigned by the Board of Directors.
Section 7 Treasurer
The Treasurer shall be in charge and have custody of all funds and securities owned by the corporation. He shall give accurate and written account for all moneys received and paid out by the corporation, in record books of the corporation and shall deposit all moneys in the name of the corporation in depositories designated by the Board of Directors.
Section 8 Secretarv:
The Secretary shall give notice, whether annual regular or special of meetings of the stockholders and of the Board of Directors as prescribed by these By Laws or as required by law. He shall also record the minutes of stockholders' and of Board of Directors' meetings in books provided by the corporation for that purpose. He shall affix the seal of the corporation to all documents that require it, and perform all such duties as may be assigned him by the Board of Directors.
Section 9 Assistant Treasurers and Assistant Secretaries:
The assistant Treasurers and assistant Secretaries shall perform such duties as assigned to them as from time to time may be prescribed by the Board of Directors.
Section 10 Bonds and Suretv:
If required by the Board of Directors, any officer or person acting in behalf of the corporation, shall give a bond for the faithful discharge of his duties in such amount and with such surety prescribed by the Board of Directors.
ARTICLE V SHARES OF STOCK
Section 1 Certificates of Stock:
Certificates of shares of stock of the corporation shall be in such form as decided by the Board of Directors. Each stockholder of the corporation shall be entitled to have a certificate certifying the number of shares of stock held by said stockholder. Each certificate of stock shall be consecutively numbered and the name of the stock holder owning the shares along with the number of shares of stock owned and the date of issue shall be registered on the books of the corporation. Each certificate shall be signed by the Chairman of the Board or the President or Vice President and by the Secretary or Treasurer, or any assistant Secretary or assistant Treasurer, and shall have the corporate seal affixed.
Section 2 Lost or Destroyed Certificates:
Certificates of stock alleged to have been lost or destroyed may be replaced by the issuence of new certificates of stock and upon such terms and indemnity to the corporation as y be prescribed by the Board of Directors.
Transfers or shares of the corporation shall be transrerable only on the record books of the corporation by the holders of shares thereof, either in person or by their duly authorized attorneys, and upon surrender, to the corporation, of the old certificates for cancellation. The corporation shall deem the person in whose name the shares of stock are recorded on the books of the corporation as the absolute owner of said shares of stock for any and all purposes.
Section 4 Record Date:
For the purpose of determining the stockholders entitled to notice of, or to vote at, any meeting of stockholders, or stockholders entitled to receive payment of any dividends, or for the allotment of any rights, or to consent to any corporate action in writing without a meeting, or to exercise any other such rights for the purpose of anv corporate action, the Board of Directors, in lieu of closing the stock transfer books, may fix, in advance, a record date of not more than fifty days, nor less than ten days before the day of such meeting is to be held.
ARTICLE VI ~ISCAL YEAR
The fiscal year of the corporation shall be determined by the Board of Directors, and subject to applicable law.
ARTICLE VII SEAL
The seal of the corporation shall be circular in form and shall have inscribed the name of the corporation and the words "CORPORATE SEAL" state of " ".
ARTICLE VIII DIVIDENDS
Subject to applicable law, the Board of Directors may, declare dividends upon its outstanding shares of stock, and the corporation may pay dividends on such shares of stock out of funds available therefor, and upon such terms and conditions as may be determined from time to time by the Board of Directors.
ARTICLE IX AMENDMENTS
These By Laws may be altered, amended or repealed and new By Laws may be made at any annual meeting of the stockholders, or at any special meeting of stockholders, provided notice for that purpose is contained in the notice of such special meeting, and by a majoritv vote of the stockholders entitled to vote thereat.
ACTION BY INCORPORATORS OF
I (We), the undersigned, being the sole (all) incorporator (s) of
a (YOUR STATE) corporation, do hereby select and
appoint
to act as the (sole) director (s) of the above named corporation,
to hold office until the first annual meeting of the stockholder (s)
of the above named corporation or until their (his) (her) successor(s)
shall be elected or appointed and shall qualify.
Incorporator
Incorporator
Incorporator
Dated:
This form may be used by one or more incorporators.
~AIVER OF ~OTICE OF FIRST
~EETI~G OF BOARD OF DIRECTORS OF
We, the undersigned, being all the directors of
a (YOUR STATE) corporation,
hereby waive all notice and consent and agree that the first meeting
of the Board of Directors be held at
in the city of
in the state of of
h e r~
, 19 at the hour of
~t. for
the purpose of electing officers and the transaction of any other business as may lawfully come before said meeting.
Director
Director
Dated:
~
INUTES OF FIRST ORGANIZATIONAL ~EETING
OF RnAR~ OF DIRECTORS OF
(NAME OF CORPORATION)
A ~ YC)UR S TATE j
~ (ENTER THE WORD CORPORATION)
The first organizational meeting of the Board of Directors
of completing the organization o~ its affairs, was held at:
f ~r th~ purpose
in the city of
on the day of , 19 , at the hour of
_~ .
The following were present:
being all the directors of the above named corporation.
One of the directors called the meeting to order. Upon motion duly made, seconded, and unanimously carried, was elected Chairman of the meeting and _was elected Secretary of the meeting.
The Chairman then called on the Secretary to read a written Waiver of Notice of this meeting, that was signed by all the directors and ordered said Waiver of Notice to be appended to these minutes.
CERTIFICATE OF I~CORPORATION
Ihe Secretary then presented and .
the meeting a copy of the Certificate of Incorporation of the corporation, and reported that on the day of _
, 19 , the original thereof was duly filed in the office of the (NAME OF
nFF T ( E T SSU ~ NG CFRT I F I CATE ) the official filing date of:
and had been assigned
and the official filing number of:
The Secretary was then directed to append to these minutes a certified copy of said Certificate of Incorporation, showing the filing date and filing number along with the original receipt showing payment of the organization filing fee issued by the office of the
(NAME OF OFFICE ISSUING CERTIFICATE)
BY LAWS
The Chairman then presented a set of By Laws to govern and regulate the business and affairs of the corporation.
Upon motion duly made, seconded, and unanimously carried, the following resolution was adopted:
RESOLVED, that the By Laws presented to this meeting in the form adopted by the Board of Directors, be and the same are hereby adopted as and for the By Laws of this corporation.
The Secretary was then directed to cause said By Laws to be inserted in the minute book of the corporation immediately following the minutes.
CORPORATE SEAL
The Secretary then presented to the meeting a seal to be used as the seal of the corporation, with said seal making the following impression:
(SEAL)
Upon motion duly made, seconded, and unanimously carried, the following resolution was adopted:
RESOLVED, that the seal now presented at this meeting be, and the same is hereby adopted as the corporate seal of this corporation.
STOCK CERTIFICATES
The Secretary then presented to the meeting a form of certificate for shares of stock of the corporation.
Upon motion duly made, seconded, and unanimously carried, the following resolution was adopted:
RESOLVED, that the form of certificate representing shares of stock of the corporation be, and it hereby is approved and adopted as the certificate for shares of stock of the corporation and that a specimen of said certi ficate shall be inserted in the minute book following the minutes of this meeting.
Ihe Chairman then stated that the Board of Directors are authorized and directed to issue and sell the shares of stock of the corporation.
Upon motion duly made, seconded, and unanimously carried, the following resolution was adopted:
RESOLVED, that the Board of Directors or the President or Vice President and the Secretarv of the corporation be, and are hereby authorized to issue and sell from time to time, the shares of stock of the corporation, and accept in payment, cash or other real property, or labor done, or services performed, and in compliance with all of the terms and conditions of the state securities law.
BANK RESOLUTION
The Chairman then suggested that the Treasurer open a bank account for the handling of funds and other securities of the corporation.
Upon motion duly made, seconded, and unanimously carried, the following resolution was adopted:
RESOLVED, that the Treasurer be and hereby is authorized and directed to open a bank account in the name of this corporation with the following named bank or financial institution:
ORGANIZATIONAL E~PENSES
The Chairman then suggested that the corporation provide the payment of organizational expenses of the corporation.
Upon motion duly made, seconded, and unanimously carried. the following resolution was adopted:
RESOLVED, that the Treasurer be and hereby is authorized and directed to pay, out of funds of the corporation, all expenses and charges that have arised out of the organization of this corporation.
MISCELLANEOUS BUSINESS
The Chairman then asked if there was any other business to come before this meeting.
ADJOURNMENT
There being no further business to come before the meeting, on motion duly made, seconded, and unanimously carried, the meeting was adjourned.
CHA I RMAN
APPROVED
S ECRETARY
WAIVER OF NOTICE TO HOIDING
OF FIRST MEETING OF STOCKHOLDERS OF
(NAME OF CORPORATION)
A (YOUR STATE)
_corporation
We, the undersigned, being all of the stockholders of the above named corporation, DO HEREBY agree and consent to holding the first meeting of the stockholders of said corporation at:
(ADDRESS OF MEETING)
for the purpose of eLecting officers and directors, ratifying its Articles of Incorporation and by laws, and for the transaction of all such other business as may be brought before said meeting, and DO HEREBY waive all notice of said meeting thereof.
Dated: _
STOCKHOLDER
STOCKHOLDER
STOCKHOLDER
STOCKHOLDER
NOTICE OF FIRST MEETING
OF STOCKHOIDERS OF
(name of corporation)
Notice is herein stated and given that the first meeting of the stockholders of (name of cor~oration) for the pur~ose of electing officers and the transaction thereat of all such business as may lawfully come before said meeting,will be
held at:
PLACE OF MEETING (address)
(city)
(state)
DATE OF MEETING (dav)
(month) 1~
(hour) M
day of 1q
secretary
MINUTES OF FIRST MEETING OF
STOCKHOLDERS O~
(NAME OF CORPORATION)
The first meeting of the stockholders or the above named corporation was held at (~n~F~) in the city of day of o'clock
_ in the State of
The meeting was duly called to order by the president of the corporation, who read the agenda.
The secretary then read the list of stockholders as their names appeared in the record book of the corporation, and by a show of hands vote, the secretary declared that a quorum of the stockholders was present.
The secretary then read a Waiver of Notice of Meeting, which had been signed by all of the stockholders of the corporation, and on motion duly made, seconded, and carried, said Waiver of ~otice of ~eeting was appended to the minutes of this meeting.
Ihe president then called on the secretary to read the minutes of the organization meeting of the board of directors and the minutes of the first meeting of the board of directors, and
Upon motion duly made, seconded, and unanimously carried, the following resolutions were adopted:
WHEREAS, the minutes of the organizational meeting of the corporation and the minutes of the first meeting of the board of directors have been read at this meeting: and
WHEREAS, the by laws to govern the conduct of the corporation were adopted at the first meeting of the board of directors, it is
RESOLVED, that the stockholders of the corporation hereby approve, ratify, and adopt said by laws as the by laws of the corporation, and it is
FURTHER RESOLVED, that all of the action taken and the decisions that were made at the organization meeting and at the first meeting of the board of directors hereby are approved ratified, and adopted, and it is
FURTHER RESOLVED, that the signing of these minutes by the stockholders of this corpo ration shall constitute full approval of all actions herein stated in these minutes.
There being no further business to come before this meeting, on motion duly made, seconded, and carried, the meeting was adjourned.
Stockholders:
NOTICE OF ANNUAI MEETING OF
( NAME OF CORPORAT I ON )
Notice is herein stated and given that the annual meeting of the stockholders of
( NAME OF CORPORAT I ON ) for the transaction thereat of any such business as may lawfully come before this meeting for consideration, will be held at:
( ADDRESS ) in the city of _ ;n thP ct~t~ f~f on the
Date day of
SECRETARY
_ dav o~
at the hour of o'clock
19_.
State of _ 19
MINUTES OF ANNUAL MEETING OF
STOCKHOLDERS OF
The annual meeting of the stockholders of _
for the year 19
in the city of _
at o'clock
was held at
M., pursuant to a Waiver of Notice signed by all the stockholders and appended to the minutes of this meeting.
The meeting was called to order by the president, and by a show of hands vote, it was declared that a quorum of the stockholders was present.
The president presented his annual report of the corpo ration's business activity for the previous year, and the plans of the coming year. On motion made, seconded, and carried, said annual report was appended to the minutes of this meeting.
The treasurer then gave his annual report of the corpo ration's financial condition and on motion made, seconded, and carried, said report was appended to the minutes of this meeting.
Election of the board of directors was next on the agenda with the following named persons being nominated:
By unamimous vote, the following persons have been
elected to the board of directors and to serve until the next annual meeting of the stockholders:
There being no further business to come before this meeting, on motion duly made, seconded, and carried, the meeting was adjourned.
PF~SIDENI
SE~, ARY
MINUTES OF ANNUAL MEETING OF BOARD OF DIRECTORS OF
The annual meeting of the board of directors of
_ State of
the day of 19 at
o'clock M.
The following were present:
being all the directors of the corporation.
for the year 19
in the city of
The chairman called for the election of officers, and the following persons were elected to the office set opposite their respective names, to hold office for the term provided in the by laws:
NAME
OFFICE
President
Vice President
Treasurer
Secretary
By unanimous vote the following salaries were fixed:
N _ TITLE
Summary
If you are the owner manager of a small business you may have been wondering about the advisability of incorporating your business, particularly if you are seeking equity capital.
This Aid does not discuss the advantages and disadvantages of the corporate form; its purpose is to acquaint you with some of the basic steps involved once you have decided to incorporate.
This Aid is not to be considered a substitute for professional advice. Legal guidance will insure that (a) the articles of incorporation and the bylaws are tailored to the needs of your particular business enterprise, (b) you understand the various aspects of the tax obligations involved, and (c) you will be in compliance with the State, Vocal, and Federal laws affecting the corporation.
Laws governing the procedure for obtaining a corporate charter vary among States. Detailed information about the requirements of your State can be obtained from the secretary or other official designated to supervise the granting of corporate charters.
Choosing the Location
The majority of small and medium sized businesses, especially those whose trade is local in nature, find it advisable to obtain their charter from the State in which the greatest part of their business is conducted.
Out of State, or "foreign," incorporation often results in the additional payments of taxes and fees in another jurisdiction. Moreover, under the laws of many States the property of a foreign corporation is subject to less favorable treatment, especially in the area of attachment of corporate assets. This legal difference could prove especially hazardous to a small business.
On the other hand, you should look into possible benefits to be gained from incorporation in another State. Such factors as State taxes, restrictions on corporate powers and lines of business in which a company may engage, capital requirements, restrictions upon foreign corporations in your State, and so forth should be taken into consideration in selecting the State of incorporation. For example, you should be aware that some States require a foreign corporation to obtain a certificate to do business in their State. Without such certification the corporation may be deprived of the right to sue in those States.
The fee or organization tax charged for incorporation varies ~greatly from State to State.
Certificate Of Incorporation
Generally. the first step in the required procedure is preparation, by the incorporators, of a "certificate of incorporation." Most States used to require that the certificate be prepared by three or more legally qualified persons, but the modern trend is to require only one incorporator. An incorporator may, but not necessarily must, be an individual who will ultimately own stock in the corporation.
For purposes of expediting the filing of articles, "dummy" incorporators are often employed. These dummy incorporators are usually associated with a company that performs this service or with an attorney for the organizers. They typically elect their successors and resign at the meeting of the incorporators.
Many States have a standard certificate of incorporation form which may be used by small businesses. Copies of this form may be obtained from the designated State official who grants charters and, in some States. from local stationers as well. The following information is usually required:
1. The corporate name of the company. Legal requirements generally are (a) that the name chosen must not be so similar to the name of any other corporation authorized to do business in the State and (b) that the name chosen must not be deceptive so as to mislead the public. In order to be sure that the name you select is suitable. check out the availability of the name through the designated State official in each State in which you intend to do business before drawing up a certificate of incorporation. This check can be made through a service company. In some States, there is a procedure for reserving a name.
2. Purposes for which the corporation is formed. Several States permit very broad language, such as "the purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized." How ever, most States require more specific language in setting forth the purposes of the corporation. Even where State law does not require it, the better practice is to employ a "specific object" clause which spells out in broad descrip tive terms the projected business enterprise. At the same time take care to allow for the possibility of territorial. market, or product expansion. In other words, the lan guage should be broad enough to allow for expansion and
yet specific enough to convey a clear idea of the projected enterprise.
The use of a specific object clause. even where not required by State law, is advisable for several reasons. It will convey to financial institutions a clearer picture of the corporate enterprise and will prevent problems in qualifying the corporation to do business in other jurisdic tions. Reference books or certificates of existing corpora tions can provide examples of such clauses.
3. Length of time for which the corporation is being formed. This may be a period of years or may be perpet ual.
4. Names and addresses of incorporators. In certain States one or more of the incorporators is required to be a resident of the State within which the corporation is being organized.
5. Location of the registered office of the corporation in the State of incorporation. If you decide to obtain your charter from another State, you will be required to have an office there. However, instead of establishing an of fice, you may appoint an agent in that State to act for you. The agent will be required only to represent the corpora tion, to maintain a duplicate list of stockholders, and to receive or reply to suits brought against the corporation in the State of incorporation.
6. Maximum amount and type of capital stock which the corporation wishers authorization to issue. The proposed capital structure of the corporation should be set forth, including the number and classification of shares and the rights, preferences, and limitations of each class of stock.
7. Capital required at time of incorporation. Some States require that a specified percentage of the par value of the capital stock be paid in cash and banked to the credit of the corporation before the certificate of incorporation is submitted to the designated State official for approval.
8. Provisions for preemptive rights, if any, to be granted to the stockholders and restrictions, if any, on the transfer of shares.
9. Provisions for regulation of the internal affairs of the corporation.
10. Names and addresses of person who will serve as directors until the first meeting of stockholders or until their successors are elected and qualify.
11. The right to amend, alter, or repeal any provisions
contained in the certificate of incorporation. This right is generally statutory, reserved to a majority or two thirds of the stockholders. Still, it is customary to make it clear in the certificate.
If the designated State official determines that the name of the proposed corporation is satisfactory. that the certif icate contains the necessary information and has been properly executed, and that there is nothing in the certifi cate or the corporation's proposed activities that violates State law or public policy, the charter will be issued.
Officers and Stockholders
Next, the stockholders must meet to complete the incor poration process. This meeting is extremelv important. It is usually conducted by an attorney or someone familiar with corporate organizational procedure.
In the meeting the corporate bylaws are adopted and a board of directors is elected. This board of directors in turn will elect the officers who actually will have charge of the operations of the corporation-for example. the president, secretary, and treasurer. In small corporations. members of the board of directors frequently are elected as officers of the corporation.
Bylaws
The bylaws of the corporation may repeat some of the provisions of the charter and State statute but usuallv cover such items as the following:
1. Location of the principal office and other offices of the corporation.
2. Time, place, and required notice of annual and special meetings of stockholders. Also the necessary quorum and voting privileges of the stockholders.
3. Number of directors, their compensation, their term of office, the method of electing them, and the method of creating or filling vacancies on the board of directors.
4. Time and place of the regular and special director's meetings, as well as the notice and quorum requirements.
5. Method of selecting officers, their titles, duties. terms of office, and salaries.
6. Issuance and form of stock certificates, their transfers and their control in the company books.
7. Dividends, when and by whom they may be declared.
8. The fiscal year, the corporate seal, the authority to sign checks, and the preparation of the annual statement.
9. Procedure for amending the bylaws.
Special Tax Laws
At the time of the first meeting of the corporate board of directors and prior to issurance of any shares, you might consider adoption of a plan under a section of the Internal Revenue Code (IRC 1244) that grants ordinary rather than capital treatment of losses on certain "small business stock." Among the requirements of qualification as "sec tion 1244 stock" are (1) the stock must be common stock, (2) the stock must be issued by the corporation for money or other property pursuant to a written plan containing several limitations, and (3) the amount of contribution received for the stock and equity capital of the corpora tion must not exceed maximum dollar limits.
You should be aware, also, of the possibility of electing subchapter S status (IRS 1371 1379). The purpose of .subchapter S is to permit a "small business corporation" to elect to have its income taxed to the shareholders as if the corporation were a partnership. One objective is to overcome the double tax feature of the present system of taxation of corporate income. Another purpose is to permit the shareholders to have the benefit of offsetting business losses by the corporation against the income of the shareholders.
Among the qualifying requirements for electing and main taining "subchapter S" eligibility are that the corporation has no more than 10 shareholders, all of whom are individuals or estates; that there be no nonresident alien shareholders; that there be only one class of outstanding stock; that all shareholders consent to the election; and that a specified portion of the corporation's receipts be derived from actual business activity rather than passive investments. No limit is placed on the size of the corpora tion's income and assets.
If you plan to transfer property to a corporation in exchange for stock, you should realize that such a trans fer is a taxable transaction unless the transfer complies with the provisions of IRC section 351.
Other Considerations
If your business is at present a sole proprietorship or partnership, you will need to secure a new taxpayer identification number and unemployment insurance ac count. You should find out in advance whether present licenses and leases will be transferable to the new corpo rate entity.
SAMPLE ARTICLES OF INCORPORATION
PLUS INSTRUCTIONS
Write or call your state office (see State Requirements for General Business Corporations) requesting incorporating forms, fee schedule and incorporation information. Complete the forms and return them to the state office along with the necessary fees. The state office will record your incorporation and return to you, one copy showing that it has been recorded along with a Certificate of Incorporation or Charter, as the case may be.
The following is a completed copy of Articles of Incorporation for you to use as a model. The forms used to incorporate vary some what from state to state, but most of them are close to this model.
Articles of Incorporation
Theundersignednaturalperson(s~oftheageofeighteenyearsormoreforthepurposeofformingacorporationunderThe General and Business Corporation Law of adopt the following Articles of Incorporation:
ARTICLE ONE
The nameof thecorporation is: John Doe Mail Order, Inc.
ARTICLE TWO
The address. including street and number. if any, of the corporation's initial registered office in this state is:
1112 Main Street, AnY Town, USA OOOOO
and the name of its initial agent at such address is: John Doe
ARTICLE THREE
The aggregate number. ciass anci par ~alue. if any, of shares ~ hich the corporation shall ha~e authorit~ is issue shall be:
The aggregate number of shares of stock which the corporation shall have authority to issue is 1,000 with the class of stock being common with no par value.
ARTICLE ONE: Here fill in the name of your corporation.
ARTICLE TWO: Here give the street address of the corporations registered o~rice along with the name of the corporations initial agent. The initial agent is the person upon whom any process, notice or demand required or permitted by law may be served for the corporation.
ARTICLE THREE: The first paragraph of Article Three requests the number, cLass and par value of the shares of stock that the corporation shall issue.
Number: It is best to issue the maximum number of shares of stock that will give you the lowest incorporating fee. Since incorporating fees vary from state to state, it is best to check with your state to find out the exact number of shares of stock to issue that will give you the lowest incorporating fee. In the example, we have used 1,000 shares, this is about the average number.
Class: The two most widely used classes of shares of stock are common stock and preferred stock. Common stock is the voting stock of the corporation. Preferred stock usually does not have any voting privileges but is given some preference over common stock, such as, "will be paid a dividend of so many dollars per share before the common stock can receive any dividends." Most small corporations issue only common stock.
Par Value: The value of a share of stock can vary, depending on the overall worth of the corporation, so the "par value' of the share of stock becomes misleading and unimportant. A stock certificate with "Par Value $100.00 Per Share" printed on it could be worth 10› per share, or it could be worth $10,000.00 per share depending on the financial condition of the corporation at the time of the sale. The same holds true for a stock certificate printed "No Par Value."
It is usually best for a small corporation to issue no par value stock, since it requires less paper work.
The second paragraph of Article Three is for corporations who are issuing different classes of stock. Since your corporation will be a small one, at least in the begining, just write the word "none" in this space.
ARTICLE ONE: Here fill in the name of your corporation.
ARTICLE TWO: Here give the street address of the corporations registered o~rice along with the name of the corporations initial agent. The initial agent is the person upon whom any process, notice or demand required or permitted by law may be served for the corporation.
ARTICLE THREE: The first paragraph of Article Three requests the number, cLass and par value of the shares of stock that the corporation shall issue.
Number: It is best to issue the maximum number of shares of stock that will give you the lowest incorporating fee. Since incorporating fees vary from state to state, it is best to check with your state to find out the exact number of shares of stock to issue that will give you the lowest incorporating fee. In the example, we have used 1,000 shares, this is about the average number.
Class: The two most widely used classes of shares of stock are common stock and preferred stock. Common stock is the voting stock of the corporation. Preferred stock usually does not have any voting privileges but is given some preference over common stock, such as, "will be paid a dividend of so many dollars per share before the common stock can receive any dividends." Most small corporations issue only common stock.
Par Value: The value of a share of stock can vary, depending on the overall worth of the corporation, so the "par value' of the share of stock becomes misleading and unimportant. A stock certificate with "Par Value $100.00 Per Share" printed on it could be worth 10› per share, or it could be worth $10,000.00 per share depending on the financial condition of the corporation at the time of the sale. The same holds true for a stock certificate printed "No Par Value."
It is usually best for a small corporation to issue no par value stock, since it requires less paper work.
The second paragraph of Article Three is for corporations who are issuing different classes of stock. Since your corporation will be a small one, at least in the begining, just write the word "none" in this space.
The preferences. qualifications. Iimitations. restrictions. and the special or relative rights. including convertible rights. if any, in respect of the shares of each class are as follows:
ARTICLE FOUR
The e.~;lent. if an~. ~o ~ hich the preemD~l~e right of a sharehoider to acquire aaciitionai shares is iimited or uenie(i.
!~ONE
ARTICLE FIVE
The name and place of residence of each incorpora~or is as follows:
John Doe
Jane Doe
Jean Doe
Street
1112 Main Street
1112 Main Street
2221 First Street
ARTICLE SIX
~City,,
Any Town,USA 00000
Any Town,USA 00000
Any Town,USA 00000
The number ot directors to constitute the first board of directors is three (3~ . Thereafter the number or directors .hall be fi~ed b! . or in the manner provicied in the b laws. Any changes in the number ill be reported to the Secretary oi State w ithin thirt~ caiendar da~s of such change.
ARTICLE SEVEN
The duration of the corporation j5 Perpetual
ARTICLE EIGHT
The corporation is formed for the following purposes:
To carry on any and all of a mail order business and all other legal acts permitted general and business corporations.
'IT~ESS ~'HEREOF. these .Articles of Incorporation have been signed this _
ARTICLE FOUR: Deals with the stockholders rights to acquire additional shares of stock in the corporation. Since most small corporations issue common stock and the rights of a stockholder to acquire additional shares of stock are granted by law in most states, just insert the word "none".
ARTICLE FIVE: Here fill in the name and complete address of each incorporator.
ARTICLE SIX: Requests the number of directors that will make up the first board of directors. In our example, we have used three (3) directors, which is the minimum number in some states. If your state requires more than one (1) director, you can use your spouse, family member or a close friend as the other directors.
ARTICLE SEVEN: Asks the duration of the corporation. Except for the State of Mississippi which is 99 years, all the states allow perpetual duration to all corporations. Insert the word "perpetual" or the number of years you wish the corporation to exist.
ARTICLE EIGHT: Asks the purpose for which the corporation is organized. Most states give broad general powers to corporations, therefore, list the specific purpose for which the corporation is being organized, such as, "to carry on any and all of a mail order business and all other legal acts permitted general and business corporations." This statement also applies to any other type of business you might want to incorporate.
BY LAW S
OF
ARTICLE I OFFICES
Section 1 Principal Office:
The principal office of the corporation shall be located and maintained in the city of in the count~ of
Section 2 Other Offices:
in the state of
The corporation may also have other offices, as determined by the Board of Directors, either within or without the state of and either within or without the United States.
ARTICLE II MEETING OF STOCKHOLDERS
Section 1 Annual MeetinPs:
The annual meeting of the stockholders for the purpose of electing directors of the corporation, and for any other business as may properly come before the meeting, shall be held within five months of the close of the fiscal year of the corporation.
Section 2 SDecial Meetings:
Special meetings of the stockholders for any purpose as stated in the notice may be called at any time by the Board of Directors, or by the President of the corporation. At written request of a majority of the stockholders entitled to vote, special meetings shall be called by the President or the Secretary.
Section 3 Place of Meetings:
All meetings of stockholders of the corporation shall be held at the principal office of the corporation or at any other place as stated in the notices of such meetings as may be determined by the Board of Directors.
Section 4 Notice of meetings:
(a) Written notice of each meeting, stating the place where, the date and time when said meeting is to be held, shall be given each stockholder entitled to vote at such meeting whether annual or special, not less than ten days or more than fifty days before such meeting is to be held. Notice of such meetings, whether annual or special, shall also state the general nature for which the meeting is called.
(b) Notices of all meetings shall be written or printed and delivered either personally or by mail to the stockholders address as it appears on the records of the corporation. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail in a sealed envelope with prepaid postage affixed thereon.
Section 5 Quorum:
Execpt as otherwise mandatory by law, or by the Articles of Incorpo ration, or as otherwise provided by these By Laws, at any and all annual or special meetings of the stockholders of the corporation, the presence, either in person or by proxy, of stockholders holding a majority amount of the stock of the corporation, who are entitled to vote at such meeting, shall constitute a quorum for the purpose of transacting any business. At any annual or special meeting of stockholders, a quorum has not been established, the stockholders entitled to vote at such meeting, by a majority vote, may adjourn such meeting by an announcement at the meeting. At any such adjourned meeting at which a quorum has been established, the stockholders may validly proceed to transact any business which might have been trans acted at the meeting originally noticed.
Section 6 Voting:
(a) Subject to and in accordance with the Articles of Incorporation, these By Laws, or by statute, each stockholder entitled to vote, shall be entitled to one vote for each share of stock held by such stock holder.
(b) Each stockholder entitled to vote at any meeting, may vote by proxy, when submitted in writing of such stockholder wishing to do so.
(c) No proxy shall be voted after eleven months from the date of its implementation, unless otherwise stated for a longer peroid of time.
(d) ~11 corporate action to be voted on, shall be decided by a majority of the votes cast.
Section 7 tockholder List:
The officer in charge of the stock ledger for the corporation shall make a full list of all stockholders entitled to vote at corporation meetings. Said officer shall set in order alphabet ically, each stockholders name, address and the number of shares of stock held by each. The stockholder list shall be completed and open for examination ten days before meetings. Any stockhold wanting to look over the stockholder list may do so during normal business hours at the principal office of the corporation, or at such other place or places where said meeting is to be held. The stockholder list shall be kept open and available for inspec tion by stockholders at such meetings for the entire time of the meetings.
Section 8 Action Without Meeting:
Any corporate action which may be taken at a meeting requiring the vote of stockholders at a meeting thereof, may be taken without a meeting, if all the stockholders entitled to vote on the subject matter if such meeting were held, shall consent in writing to the action being taken.
ARTICLE III BOARD OF DIRECTORS
Section 1 Number Election and Term:
(a) The number of directors of the corporation shall be as determined by a majority vote of the full Board of Directors. The number of directors may not be less than three, unless all the shares of stock of the corporation are owned beneficially and of
_____ by either one or two stockholders, then the number of direct may not be less than the number of stockholders.
(b) Each director shall be elected at the annual meeting of the stockholders by a majority vote of stockholders entitled to vote thereat, either in person or by proxy.
ors
(c) Each director shall serve office until the next annual meeting of stockholders for the purpose of electing directors, and shall serve until such directors successor shall be elected and qualified, or until any such directors death, resignation or removal from office.
Section 2 General Powers:
Ihe Board of Directors shall be responsible for the business and affairs of the corporation.
Eection 3 Chairman:
Ihe Chairman of the Board of Directors, provided one is elected, shall preside at all the meetings of the Board of Directors and shall have such powers and duties as generally pertain to his respective office.
Section 4 Annual and Re~ular Meetings:
(a) The Annual meeting of the Board of Directors of the corpora tion shall be held immediately after the annual meeting of the stockholders, at the same place of the annual stockholders meeting.
(b) The Board of Directors, shall from time to time hold other regular meetings and may provide by resolution, the time and place for the holding of such meeting thereof.
Section 5 Special meetings:
Special meetings of the Board of Directors may be called by the President, or at the request of any one or more of the Directors of the corporation. The time and place of such special meeting shall be specified in the notices of such meeting thereof.
Section 6 Notice of Meetings:
(a) Annual meetings of the Board of Directors shall be held without any other notice than this By Law.
(b) Notice shall be given at least five days before any special meeting of the Board is to be held, to each Director of the corpo ration. If the place of such special meeting held is designated outside the state of , days notice shall be given.
:~n ~ ; t; nn~l f;~T~
(c) Written notice of any such special meeting shall be delivered personally or mailed to each Director at his address as it appears on the records of the corporation. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail in a sealed envelope with prepaid postage affixed thereon.
Section 7 Quorum and Adjournments
.
At meetings of the Board of Directors, the presence of a majori of Directors shall constitute a quorum, for the transaction of business. If less than a majority of directors are present at said meeting, a majority of Directors present may adjourn such meeting by an announcement at the meeting.
Section 8 Manner of Actions:
At any meeting of the Board of Directors where a quorum has been established, the act of the majority of the Directors present at such meeting, shall be the act of the Board of Directors.
Section 9 Vacancies:
If the position of any Director becomes vacant for any reason, the remaining Directors by a majority, though less than a quorum, may fill such vacancy or vacancies by appointment of such qualified person or persons to fill the vacant position for the unexpiried term and until the next annual meeting of the stockholders for the purpose of electing directors of the corporation.
Section 10 ResiPnations:
~ny director or officer may resign at any time. Written notice of any resignation must be given to the Board of Directors, the President, or the Secretary of the corporation. Any such resigna tion shall take effect at the time of receipt by the Board of Directors, the President, or the Secretary, and acceptance of such resignation shall not be necessary to make it effective.
The removal of any director may be done with or without cause and at any time by a majority vote of the stockholders entitled to vote at a special meeting called for that purpose.
Section 12 ComDensation:
Stated compensation shall not be received by any director for their services, but by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board of Directors, provided however, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor.
ARTICLE IV OFFICERS
Section 1 Number and Qualifications:
(a) The corporation shall have such officers consisting of a President, a Secretary and a Ireasurer. The Board of Directors may also elect such other officers including a Chairman of the Board, one or more Vice Presidents, Assistant Secretaries, and Assistant Treasurers as it may from time to time deem necessary for the operation of the corporation.
(b) riith the exception of the office of the Chairman of the Board of Directors, any other officer may be, but need not be, a director of the corporation, and the same person may hold two or more offices.
Section 2 Election and Term:
(a) The officers of the corporation shall be elected by the Board of Directors at the first regular meeting of the Board after each annual meeting of the stockholders.
(b) Each officer shall hold office until his successor has been duly elected and has qualified, or until his death, resignation or removal from office.
Section 3 Removal:
The Board of Directors, by a majority vote may remove any officer of the corporation, either with or without cause and elect a successor to fill the position of any officer who has been removed.
The Board of Directors, by a majority vote, may fill a vacancy in any office due to a death, resignation, removal, disqualification or any other reason for the unexpired portion of the term.
Section 5 President:
The President shall be the chief executive officer of the corpo ration and shall supervise, control and manage the general business operations of the corporation. The President shall preside at all meetings of the stockholders, and in the absence of the Chairman of the Board he shall preside at all meetings of the Board of Directors. The President, along with any other officer authorized by the Board of Directors, shall sign documents in behalf of the corporation and shall have and perform such other duties as may be determined by the Board of Directors.
Section 6 Vice Presidents:
Each Vice President shall perform such duties as may be prescribed and given to him as from time to time shall be assigned by the Board of Directors.
Section 7 Treasurer
The Treasurer shall be in charge and have custody of all funds and securities owned by the corporation. He shall give accurate and written account for all moneys received and paid out by the corporation, in record books of the corporation and shall deposit all moneys in the name of the corporation in depositories designated by the Board of Directors.
Section 8 Secretarv:
The Secretary shall give notice, whether annual regular or special of meetings of the stockholders and of the Board of Directors as prescribed by these By Laws or as required by law. He shall also record the minutes of stockholders' and of Board of Directors' meetings in books provided by the corporation for that purpose. He shall affix the seal of the corporation to all documents that require it, and perform all such duties as may be assigned him by the Board of Directors.
Section 9 Assistant Treasurers and Assistant Secretaries:
The assistant Treasurers and assistant Secretaries shall perform such duties as assigned to them as from time to time may be prescribed by the Board of Directors.
Section 10 Bonds and Suretv:
If required by the Board of Directors, any officer or person acting in behalf of the corporation, shall give a bond for the faithful discharge of his duties in such amount and with such surety prescribed by the Board of Directors.
ARTICLE V SHARES OF STOCK
Section 1 Certificates of Stock:
Certificates of shares of stock of the corporation shall be in such form as decided by the Board of Directors. Each stockholder of the corporation shall be entitled to have a certificate certifying the number of shares of stock held by said stockholder. Each certificate of stock shall be consecutively numbered and the name of the stock holder owning the shares along with the number of shares of stock owned and the date of issue shall be registered on the books of the corporation. Each certificate shall be signed by the Chairman of the Board or the President or Vice President and by the Secretary or Treasurer, or any assistant Secretary or assistant Treasurer, and shall have the corporate seal affixed.
Section 2 Lost or Destroyed Certificates:
Certificates of stock alleged to have been lost or destroyed may be replaced by the issuence of new certificates of stock and upon such terms and indemnity to the corporation as y be prescribed by the Board of Directors.
Transfers or shares of the corporation shall be transrerable only on the record books of the corporation by the holders of shares thereof, either in person or by their duly authorized attorneys, and upon surrender, to the corporation, of the old certificates for cancellation. The corporation shall deem the person in whose name the shares of stock are recorded on the books of the corporation as the absolute owner of said shares of stock for any and all purposes.
Section 4 Record Date:
For the purpose of determining the stockholders entitled to notice of, or to vote at, any meeting of stockholders, or stockholders entitled to receive payment of any dividends, or for the allotment of any rights, or to consent to any corporate action in writing without a meeting, or to exercise any other such rights for the purpose of anv corporate action, the Board of Directors, in lieu of closing the stock transfer books, may fix, in advance, a record date of not more than fifty days, nor less than ten days before the day of such meeting is to be held.
ARTICLE VI ~ISCAL YEAR
The fiscal year of the corporation shall be determined by the Board of Directors, and subject to applicable law.
ARTICLE VII SEAL
The seal of the corporation shall be circular in form and shall have inscribed the name of the corporation and the words "CORPORATE SEAL" state of " ".
ARTICLE VIII DIVIDENDS
Subject to applicable law, the Board of Directors may, declare dividends upon its outstanding shares of stock, and the corporation may pay dividends on such shares of stock out of funds available therefor, and upon such terms and conditions as may be determined from time to time by the Board of Directors.
ARTICLE IX AMENDMENTS
These By Laws may be altered, amended or repealed and new By Laws may be made at any annual meeting of the stockholders, or at any special meeting of stockholders, provided notice for that purpose is contained in the notice of such special meeting, and by a majoritv vote of the stockholders entitled to vote thereat.
ACTION BY INCORPORATORS OF
I (We), the undersigned, being the sole (all) incorporator (s) of
a (YOUR STATE) corporation, do hereby select and
appoint
to act as the (sole) director (s) of the above named corporation,
to hold office until the first annual meeting of the stockholder (s)
of the above named corporation or until their (his) (her) successor(s)
shall be elected or appointed and shall qualify.
Incorporator
Incorporator
Incorporator
Dated:
This form may be used by one or more incorporators.
~AIVER OF ~OTICE OF FIRST
~EETI~G OF BOARD OF DIRECTORS OF
We, the undersigned, being all the directors of
a (YOUR STATE) corporation,
hereby waive all notice and consent and agree that the first meeting
of the Board of Directors be held at
in the city of
in the state of of
h e r~
, 19 at the hour of
~t. for
the purpose of electing officers and the transaction of any other business as may lawfully come before said meeting.
Director
Director
Dated:
~
INUTES OF FIRST ORGANIZATIONAL ~EETING
OF RnAR~ OF DIRECTORS OF
(NAME OF CORPORATION)
A ~ YC)UR S TATE j
~ (ENTER THE WORD CORPORATION)
The first organizational meeting of the Board of Directors
of completing the organization o~ its affairs, was held at:
f ~r th~ purpose
in the city of
on the day of , 19 , at the hour of
_~ .
The following were present:
being all the directors of the above named corporation.
One of the directors called the meeting to order. Upon motion duly made, seconded, and unanimously carried, was elected Chairman of the meeting and _was elected Secretary of the meeting.
The Chairman then called on the Secretary to read a written Waiver of Notice of this meeting, that was signed by all the directors and ordered said Waiver of Notice to be appended to these minutes.
CERTIFICATE OF I~CORPORATION
Ihe Secretary then presented and .
the meeting a copy of the Certificate of Incorporation of the corporation, and reported that on the day of _
, 19 , the original thereof was duly filed in the office of the (NAME OF
nFF T ( E T SSU ~ NG CFRT I F I CATE ) the official filing date of:
and had been assigned
and the official filing number of:
The Secretary was then directed to append to these minutes a certified copy of said Certificate of Incorporation, showing the filing date and filing number along with the original receipt showing payment of the organization filing fee issued by the office of the
(NAME OF OFFICE ISSUING CERTIFICATE)
BY LAWS
The Chairman then presented a set of By Laws to govern and regulate the business and affairs of the corporation.
Upon motion duly made, seconded, and unanimously carried, the following resolution was adopted:
RESOLVED, that the By Laws presented to this meeting in the form adopted by the Board of Directors, be and the same are hereby adopted as and for the By Laws of this corporation.
The Secretary was then directed to cause said By Laws to be inserted in the minute book of the corporation immediately following the minutes.
CORPORATE SEAL
The Secretary then presented to the meeting a seal to be used as the seal of the corporation, with said seal making the following impression:
(SEAL)
Upon motion duly made, seconded, and unanimously carried, the following resolution was adopted:
RESOLVED, that the seal now presented at this meeting be, and the same is hereby adopted as the corporate seal of this corporation.
STOCK CERTIFICATES
The Secretary then presented to the meeting a form of certificate for shares of stock of the corporation.
Upon motion duly made, seconded, and unanimously carried, the following resolution was adopted:
RESOLVED, that the form of certificate representing shares of stock of the corporation be, and it hereby is approved and adopted as the certificate for shares of stock of the corporation and that a specimen of said certi ficate shall be inserted in the minute book following the minutes of this meeting.
Ihe Chairman then stated that the Board of Directors are authorized and directed to issue and sell the shares of stock of the corporation.
Upon motion duly made, seconded, and unanimously carried, the following resolution was adopted:
RESOLVED, that the Board of Directors or the President or Vice President and the Secretarv of the corporation be, and are hereby authorized to issue and sell from time to time, the shares of stock of the corporation, and accept in payment, cash or other real property, or labor done, or services performed, and in compliance with all of the terms and conditions of the state securities law.
BANK RESOLUTION
The Chairman then suggested that the Treasurer open a bank account for the handling of funds and other securities of the corporation.
Upon motion duly made, seconded, and unanimously carried, the following resolution was adopted:
RESOLVED, that the Treasurer be and hereby is authorized and directed to open a bank account in the name of this corporation with the following named bank or financial institution:
ORGANIZATIONAL E~PENSES
The Chairman then suggested that the corporation provide the payment of organizational expenses of the corporation.
Upon motion duly made, seconded, and unanimously carried. the following resolution was adopted:
RESOLVED, that the Treasurer be and hereby is authorized and directed to pay, out of funds of the corporation, all expenses and charges that have arised out of the organization of this corporation.
MISCELLANEOUS BUSINESS
The Chairman then asked if there was any other business to come before this meeting.
ADJOURNMENT
There being no further business to come before the meeting, on motion duly made, seconded, and unanimously carried, the meeting was adjourned.
CHA I RMAN
APPROVED
S ECRETARY
WAIVER OF NOTICE TO HOIDING
OF FIRST MEETING OF STOCKHOLDERS OF
(NAME OF CORPORATION)
A (YOUR STATE)
_corporation
We, the undersigned, being all of the stockholders of the above named corporation, DO HEREBY agree and consent to holding the first meeting of the stockholders of said corporation at:
(ADDRESS OF MEETING)
for the purpose of eLecting officers and directors, ratifying its Articles of Incorporation and by laws, and for the transaction of all such other business as may be brought before said meeting, and DO HEREBY waive all notice of said meeting thereof.
Dated: _
STOCKHOLDER
STOCKHOLDER
STOCKHOLDER
STOCKHOLDER
NOTICE OF FIRST MEETING
OF STOCKHOIDERS OF
(name of corporation)
Notice is herein stated and given that the first meeting of the stockholders of (name of cor~oration) for the pur~ose of electing officers and the transaction thereat of all such business as may lawfully come before said meeting,will be
held at:
PLACE OF MEETING (address)
(city)
(state)
DATE OF MEETING (dav)
(month) 1~
(hour) M
day of 1q
secretary
MINUTES OF FIRST MEETING OF
STOCKHOLDERS O~
(NAME OF CORPORATION)
The first meeting of the stockholders or the above named corporation was held at (~n~F~) in the city of day of o'clock
_ in the State of
The meeting was duly called to order by the president of the corporation, who read the agenda.
The secretary then read the list of stockholders as their names appeared in the record book of the corporation, and by a show of hands vote, the secretary declared that a quorum of the stockholders was present.
The secretary then read a Waiver of Notice of Meeting, which had been signed by all of the stockholders of the corporation, and on motion duly made, seconded, and carried, said Waiver of ~otice of ~eeting was appended to the minutes of this meeting.
Ihe president then called on the secretary to read the minutes of the organization meeting of the board of directors and the minutes of the first meeting of the board of directors, and
Upon motion duly made, seconded, and unanimously carried, the following resolutions were adopted:
WHEREAS, the minutes of the organizational meeting of the corporation and the minutes of the first meeting of the board of directors have been read at this meeting: and
WHEREAS, the by laws to govern the conduct of the corporation were adopted at the first meeting of the board of directors, it is
RESOLVED, that the stockholders of the corporation hereby approve, ratify, and adopt said by laws as the by laws of the corporation, and it is
FURTHER RESOLVED, that all of the action taken and the decisions that were made at the organization meeting and at the first meeting of the board of directors hereby are approved ratified, and adopted, and it is
FURTHER RESOLVED, that the signing of these minutes by the stockholders of this corpo ration shall constitute full approval of all actions herein stated in these minutes.
There being no further business to come before this meeting, on motion duly made, seconded, and carried, the meeting was adjourned.
Stockholders:
NOTICE OF ANNUAI MEETING OF
( NAME OF CORPORAT I ON )
Notice is herein stated and given that the annual meeting of the stockholders of
( NAME OF CORPORAT I ON ) for the transaction thereat of any such business as may lawfully come before this meeting for consideration, will be held at:
( ADDRESS ) in the city of _ ;n thP ct~t~ f~f on the
Date day of
SECRETARY
_ dav o~
at the hour of o'clock
19_.
State of _ 19
MINUTES OF ANNUAL MEETING OF
STOCKHOLDERS OF
The annual meeting of the stockholders of _
for the year 19
in the city of _
at o'clock
was held at
M., pursuant to a Waiver of Notice signed by all the stockholders and appended to the minutes of this meeting.
The meeting was called to order by the president, and by a show of hands vote, it was declared that a quorum of the stockholders was present.
The president presented his annual report of the corpo ration's business activity for the previous year, and the plans of the coming year. On motion made, seconded, and carried, said annual report was appended to the minutes of this meeting.
The treasurer then gave his annual report of the corpo ration's financial condition and on motion made, seconded, and carried, said report was appended to the minutes of this meeting.
Election of the board of directors was next on the agenda with the following named persons being nominated:
By unamimous vote, the following persons have been
elected to the board of directors and to serve until the next annual meeting of the stockholders:
There being no further business to come before this meeting, on motion duly made, seconded, and carried, the meeting was adjourned.
PF~SIDENI
SE~, ARY
MINUTES OF ANNUAL MEETING OF BOARD OF DIRECTORS OF
The annual meeting of the board of directors of
_ State of
the day of 19 at
o'clock M.
The following were present:
being all the directors of the corporation.
for the year 19
in the city of
The chairman called for the election of officers, and the following persons were elected to the office set opposite their respective names, to hold office for the term provided in the by laws:
NAME
OFFICE
President
Vice President
Treasurer
Secretary
By unanimous vote the following salaries were fixed:
N _ TITLE
AMOUNT
effective until the further order of the board of directors.
There being no further business to come before this meeting, on motion duly made, secended, and carried, the meeting was adjourned.
Date:
_ day of _
APPROVED:
AMOUNT
effective until the further order of the board of directors.
There being no further business to come before this meeting, on motion duly made, secended, and carried, the meeting was adjourned.
Date:
_ day of _
APPROVED:
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