Corporate Legal Forms

Collection of various corporate related forms covering a variety of different situations.

In recent years corporations have become the business structure of choice for many small businesses. However, they are generally a more complex form of business operation than a partnership. There are two basic types of corporations: C-corporations and S-corporations which are organized and operated in similar fashion but receive different tax treatment. In its simplest form, the corporate organizational structure consists of the following levels:
  • Shareholders: who own shares of the business but do not contribute to the direct management of the corporation.
  • Directors: who may be shareholders, but as directors do not own any of the business. They are responsible for making the major business decisions of the corporation.
  • Officers: who may be shareholders and/or directors, but, as officers, do not own any of the business. Officers are responsible for day-to-day operation of the corporate business.
Some common corporate forms are:
  • Board of Directors Agreements and Forms
  • Shareholder Agreements and Forms
  • Corporate creation, formation and operation documents.
  • Stock purchase agreements

Corporations FAQ

What are Corporations?

A corporation is a legal and business entity with separate rights and liabilities from its founding (as well as new) members. Corporations are formed for a number of reasons: to organize a new business, to protect its members from liabilities and to pool resources together. In essence, a corporation is simply a type of business; usually larger businesses register as corporations in order to handle a larger amount of members, stock owners, and partners.

There are different types of corporations that can be registered. Understanding the different benefits and features of each corporation type is important if you are planning on creating a corporation for your business, as some corporation types are better suited for different business models and industries.

What kinds of corporations exist?

In the United States, there are a few different types of corporations to be aware of:

  • General Corporation, or C Corporation: The most common corporation structure in the U.S., the C Corporation is popular because it allows for an unlimited number of stockholders – ideal for big businesses that plan on having a lot of investors or even going public with their shares. If you are planning on having over 30 stockholders in your corporation, you will likely be looking to file for a C Corporation structure.
  • S Corporation: Also known as a Subchapter S Corporation, this corporate structure is ideal for sole proprietors who want to be registered as a corporation but still enjoy many of the benefits of sole proprietorship. Needless to say, is a common type of corporation for smaller businesses, as the maximum number of stockholders is currently at the level of 75.

These are two of the most common types of corporations. If you see a company registered as an LLC, remember that the “C” actually stands for “Company,” and the organization registered thusly is technically not a corporation. There are, however, many similarities between LLCs and small corporations.

What kind of corporation should my business be?

That will depend on your business’s goals and needs. If you are a one-man or one-woman operation and don’t have a big need to expand with more members, you may be just fine running a sole proprietorship; in time, you may want to register as an S Corporation. If you have a business that is in need of outside money and is looking to expand, then a C Corporation will likely be in the cards. However, to get the best gauge on your situation, you’ll need to know more than these simple goals; you’ll need to know the precise limitations and capacities of each corporation type.

What kind of limitations does an S Corporation have?

Registering as an S Corporation comes with a number of benefits, such as the tax benefits of a sole proprietorship. However, this advantage also comes with a number of limitations. For example, passive income (such as income on rental property) cannot constitute more than 25% of the gross revenues of an S Corporation. Additionally, offering stock is difficult, as there is only one class of stock to be issued and the amount of shareholders has to be limited to 75. For many sole proprietorships, however, registering as an S Corporation allows for additional liability protection while not increasing tax burden.

Why should I incorporate?

You don’t necessarily have to. Again, it depends on your business and legal needs. The advantages to filing for corporation status are numerous; it helps to keep your liability in business dealings down while also allowing you certain tax benefits. However, there may be some limitations in certain types of corporation filings that you’ll want to be aware of. The best way to evaluate your own incorporation needs is to evaluate the needs of your business and then research which corporation type suits those needs the best. It’s also important to confer with any other members of your business.

How do I file for corporation status?

Filing for corporation status is not as difficult as it sounds. It merely requires the right paperwork and that you follow all of the procedures involved. Many downloadable corporation forms will come with instructions for filing for corporation status in your state, so be sure that you use the forms relevant to your company’s location. From there, you should have no trouble preparing the forms by filling in the blanks, reading them through, and sending them to the appropriate state office.

Besides registration forms, what other kind of relevant corporation forms exist?

There are a number of corporation-related forms you’ll likely need after incorporating your company. For the most part, it’s most convenient to download these forms in a combination package to ensure that all of the necessary forms you need are at your disposal. However, you may simply have a need for a few individual forms, such as Minutes of Shareholder Meeting or Board of Directors Unanimous Written Consent.

From the perspective of start-up forms, many of the popular forms you’ll need include the Articles of Incorporation, Amendment to Articles of Incorporation, etc. It’s good to have all of these at your disposal.

What kinds of contracts are relevant to corporation formation?

Typically, the formation of a corporation does not require contracts from the perspective of the state with which you’re filing your corporation; however, it is important that you have written contracts with all members involved with your company, such as a Partnership Agreement that lays out the details of how a business is to be structured. Having these contracts in writing will be good for your own sake; however, what’s important to the state is how your corporation is registered and structured.

When is my corporation registered?

It will depend on the state you’re filing with; typically, the wait is not long. But you’ll want to check with your local state government before assuming that your corporation has been properly filed; this will ensure that you’re handling all of your legal undertakings under the right context. Things will move most quickly when you use the relevant in-state forms for your corporation filings.

Corporate Bylaws

The bylaws of a corporation are the third part of the triangle that provides the framework for the management of the corporate business. Along with state law and the Articles of Incorporation, the bylaws provide a clear outline of the rights and responsibilities of all parties to a corporation. In particular, the bylaws provide the actual details of the operational framework for the business.

The bylaws are the internal document that will contain the basic rules on how the corporation is to be run. Every corporation must have a set of bylaws. Many of the provisions cover relatively standard procedural questions, relating to quorums, voting, and stock. Other provisions may need to be specifically tailored to the type of business for which the bylaws are intended. They are generally able to be amended by vote of the board of directors, unless the Articles of Incorporation or the bylaws themselves have transferred that authority to the shareholders. The bylaws provided on this site specify that the power to amend them is vested in the board of directors, but that the shareholders have the power to approve or reject any amendment.

The bylaws can contain very specific or very general provisions for the internal management of the company. Typically, the bylaws cover five general areas:

  • The rights and responsibilities of the shareholders
  • The rights and responsibilities of the directors
  • The rights and responsibilities of the officers
  • Financial matters
  • Methods for amending the bylaws

The following is a checklist for use in preparing your bylaws:

  • Power to designate the location of principal office of the corporation
  • Power to designate the registered office and agent of the corporation
  • Date, time, and place of annual shareholders meeting
  • Procedures for special shareholders meetings
  • Notice and waivers for shareholders meetings
  • Voting eligibility requirements for shareholders
  • Quorum and votes required for actions of shareholders
  • Shareholders proxy requirements
  • Shareholders consent resolutions
  • Shareholders cumulative voting rights
  • Powers of board of directors
  • Number of directors and term of office
  • Directors election procedures
  • Date, time, and place of annual board of directors meeting
  • Procedures for special board of directors meetings
  • Notice and waivers for board of directors meetings
  • Quorum and votes required for actions by board of directors
  • Board of directors consent resolutions
  • Removing and filling vacancies of directors
  • Salaries of directors
  • Fiduciary duty of directors
  • Number of officers and appointment and terms of officers
  • Removing and filling vacancies of officers
  • Duties of officers
  • Salaries of officers
  • How stock certificates are to be handled
  • Restrictions on the rights to transfer shares of stock (if any)
  • How corporate financial matters are to be handled
  • Whether officers or directors can borrow money from the corporation
  • Bylaw amendment procedures
  • Signatures of Secretary of Corporation and Chairperson of Board
© Nova Publishing Company, 2005

Agent: A person who is authorized to act on behalf of another. A corporation acts only through its agents, whether they are directors, employees, or officers.

Amendment: An addition, deletion or change to a corporate bylaw or article of incorporation.

Articles of Incorporation: The charter of the corporation, this is the public filing with a state that requests that the corporation be allowed to exist. Along with the corporate Bylaws, it provides details of the organization and structure of the business. The articles must be consistent with the laws of the state of incorporation.

Assumed name: A name, other than the corporation’s legal name as shown on the Articles of Incorporation, under which a corporation will conduct business. Most states require registration of the fictitious name if a company desires to conduct business under an assumed name. The corporation’s legal name is not an assumed name.

Authorized stock: The number of shares of stock that a corporation is allowed to issue as stated in the Articles of Incorporation. All authorized shares need not be issued.

Board of directors: The group with control of the general supervision of the corporation. They are elected by the shareholders and the board, in turn, appoint the officers of the corporation.

Business corporation laws: For each individual state, these provide the legal frame- work for the operation of corporations. The Articles of Incorporation and the bylaws of a corporation must adhere to the specifics of state law.

Buy-out/sell-out provision: Provision in a shareholder’s agreement that provide that if a shareholder wishes to either buy all of the outstanding shares of a corporation or sell all of their own shares of the corporation, they must be willing to allow either event to happen.

Bylaws: The internal rules that govern the management of the corporation. They contain the procedures for holding meetings, appointments, elections, and other management matters. If these conflict with the Articles of Incorporation, the provision in the articles will be controlling.

Capital: Initially, the actual money or property that shareholders transfer to the corporation to allow it to operate. Once in operation, it also consists of accumulated profits. The net worth of the corporation.

Capital stock: See Authorized stock.

C-corporation: The official IRS designation for a standard shareholder-owned corporation, as opposed to an S-corporation

Certificate of Incorporation: See Articles of Incorporation. Note, however, some states will issue a Certificate of Incorporation after the filing of the Articles of Incorporation.

Close corporation: Corporation with less than 50 shareholders that has elected to be treated as a close corporation. Not all states have close corporation statutes. (For information regarding close corporations, please consult a competent attorney).

Closely held corporation: Not a specific state-sanctioned type of corporation, but rather a designation of any corporation in which the stock is held by a small group of people or entities and is not publicly traded.

Common stock: The standard stock of a corporation that includes the right to vote the shares and the right to proportionate dividends. See also Preferred stock.

Consent resolution: Any resolution signed by all of the directors or shareholders of a corporation authorizing an action, without the necessity of a meeting.

Cumulative voting: A voting right of shareholders that allows votes for directors to be spread among the various nominees. This right protects the voting strength of minority shareholders. The amount of votes in cumulative voting is based on the number of shares held times the number of director positions to be voted on. The shareholder can then allocate the total cumulative votes in any manner.

Dissolution: Methods by which a corporation concludes its business and liquidates. Dissolutions may be involuntary because of bankruptcy or credit problems, or voluntary on the initiation of the directors or shareholders of a corporation.

Dividend: A distribution of money or property paid by the corporation to a shareholder based on the amount of shares held. Dividends must be paid out of the corporation’s net earnings and profits. The board of directors has the authority to declare or withhold dividends based on sound business discretion.

Domestic corporation: A corporation is a domestic corporation in the state in which it is incorporated. See also Foreign corporation.

Double taxation: The taxation of business profits at the corporate level and the second taxation of those same profits at the individual taxpayer level, when such profits are distributed to a corporate shareholder as dividends.

Fictitious name: See Assumed name.

Foreign corporation: A corporation is referred to as a foreign corporation in all states other than the one in which it is actually incorporated. In order to conduct active business affairs in a different state, a foreign corporation must be registered with the other state for the authority to transact business and it must pay an annual fee for this privilege.

Incorporator: The person who signs the Articles of Incorporation. Usually a person, but some states allow a corporation or partnership to be an incorporator.

Indemnify: To reimburse or compensate. Directors and officers of corporations are often reimbursed or indemnified for all the expenses they may have incurred in incorporating.

Issued shares: Shares of stock in a corporation that have been authorized by the board of directors of a corporation. See also Authorized stock or Treasury shares.

Limited liability company: A relatively new form of business entity which provides limited liability for its owners, and an opportunity to be taxed as either a sole proprietorship, partnership, or a corporation.

Minutes: A written record of the activities of a meeting.

Natural person: A human being, as opposed to a ‘corporation,’ which, in some legal situations is treated as a ‘person.’

No-par value: Shares of stock which have no specific face value. The board of directors can assign a value to the shares for sale and can then allocate a portion of the sales price to the paid-in-capital account.

Not-for-profit corporation: A corporation formed under state law that exists for a socially worthwhile purpose. Profits are not distributed but retained and used for corporate purposes. May be tax-exempt. Also referred to as “non-profit.”

Officers: Manage the daily operations of a corporation. Generally consist of a president, vice-president, secretary, and treasurer. Appointed by the board of directors.

Outstanding shares: Shares of stock in a corporation that have been authorized by the board of directors of a corporation and that have also been sold to a shareholder and are currently held by a shareholder.

Paid-in-capital: The amount of actual money that shareholders of a corporation have paid to the corporation for the shares of stock in the corporation.

Par value: The face value assigned to shares of stock. Par value stock must be sold for at least the stated value, but can be sold for more than the par value.

Perpetual duration: The ability for a corporation to have a continuing existence be- yond the lives of its founding shareholders.

Piercing the corporate veil: A legal decision that allows a court to ignore the corporate entity and reach the assets of the shareholders, directors, or officers.

Preemptive rights: A shareholder right that allows shareholders the opportunity to maintain their percentage of ownership of the corporation in the event that additional shares are offered for sale.

Preferred stock: Generally, stock that provides the shareholder with a preferential payment of dividends, but does not carry voting rights.

Proxy: A written shareholder authorization to vote shares on behalf of another. Directors may never vote by proxy (except in some close corporations).

Quorum: The required number of persons necessary to officially conduct business at a meeting. Generally, a majority of the shareholders or directors constitutes a quorum.

Record book: The corporate record book provides a written and official tally of the ownership of all of the outstanding shares of stock in the corporation.

Registered agent: The person designated in the Articles of Incorporation who will be available to receive service of process on behalf of the corporation. A corporation must always have a registered agent.

Registered office: The actual physical location of the registered agent. Need not be the actual principal place of business of the corporation.

Resolutions: A formal decision that has been adopted by either the shareholders or the board of directors of a corporation.

S-corporation: A specific IRS designation that allows a corporation to be taxed similarly to a partnership, yet retain limited liability for its shareholders.

Service of process: Summons or subpoena.

Shareholders: Own issued stock of a corporation and, therefore, own an interest in the corporation. They elect the board of directors and vote on major corporate issues.

Stock transfer book: The ledger book (or sheets) in which the registered owners of shares in the corporation are recorded.

Treasury shares: Shares of stock that were issued, but later reacquired by the corporation and not cancelled. May be issued as dividends to shareholders. They are issued but not outstanding for terms of voting and quorums.

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