Choosing the Right Legal Form of Business: The Complete Guide to Becoming a Sole Proprietor, Partnership, LLC, or Corporation by Pat Mitchell

Author:Pat Mitchell
Language: eng
Format: epub
Tags: business, small business, forms, owner, financing, ownership, guide
Publisher: Atlantic Publishing
Published: 2013-10-28T00:00:00+00:00

For an additional fee, you can also expedite the processing of your articles of incorporation. Nevada offers one-day incorporation for $100. Delaware offers one-hour incorporation for $1,000, two-hour service for $500, same-day service for $100, and 24-hour service for $50. A listing of all states’ Web sites is provided in the Appendix.

Step 8: Create your corporate kit and seal

Once you have filed your articles of incorporation, you should order your corporate kit and seal. Similar to the LLC kit, this is merely a loose-leaf binder that stores the articles of incorporation, bylaws, minutes of meetings, and a stock ledger. They cost between $50 and $100. As with the LLC kit, the corporate kit contains the following:

• Binder with the corporate name engraved on the spine on the book

• Sample bylaws and minutes of the organizational meeting

• Blank stock certificates

• Corporate seal

• Blank stock transfer ledger

Some corporate owners deem the corporate kit unnecessary, but getting the binder is a good idea, and the sample documents are available online. The kits often offer a sample S corporation selection, which can be inserted into the minutes. The corporate seal is a tool that embosses the seal of the corporation on documents. It contains the name of your corporation, state of incorporation, and date of incorporation. They are not demanded in every state anymore, but they come with the corporate kit. The stock certificates are the printed images of stock that are issued to shareholders. The stock ledger is simply the list of who owns how much stock in the corporation. It also charts sales, transfers, and other transactions of the shares of the corporation. The corporation’s secretary usually maintains the stock ledger. You can purchase a corporate kit from corporation supply companies and other office supply stores.

Step 9: Name your corporation’s directors

The directors are a corporation’s elected managers, and the incorporator appoints the directors. Then, at annual meetings, shareholders vote on directors who will serve one-year terms. Directors are often re-elected at subsequent annual meetings. Corporations are required to have a minimum of one director.

First, decide how many directors you want for your corporation. Normally, you should select the number of directors in proportion to the number of shareholders you have. Nevada and Delaware allow one-director corporations and may be suitable for one or two shareholders. Conversely, California does not permit single-director corporations unless there is only one shareholder.

Shareholders of one-director corporations are more at risk. A concept known as alter-ego liability can harm shareholders who appear to have too much of a personal interest in the company and do not separate personal and corporate assets. A single director with unlimited authority may ignore important formalities if he or she goes unchecked. On the other hand, a board with more than one member reaches decisions through discussion, consensus, and vote.

The ideal minimum number of directors is three. Two directors are also appropriate for small corporations, but if there is a disagreement and the directors cannot come to a resolution, there may be a deadlock, which could end up in court.

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