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.
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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
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Corporate Forms
A corporation is a creation of law governed by the laws of the state where it was incorporated and of the state or states in which it does business. In recent years it has become the business structure of choice for many small businesses. Corporations are, generally, a more complex form of business operation than either a sole proprietorship or partnership. Corporations are also subject to far more state regulations regarding both their formation and operation.
There are two basic types of corporations: C-corporations and S-corporations. These prefixes refer to the particular chapter in the U.S. Tax Codes that specify the tax con- sequences of either type of corporate organization. In general, both of these two types of corporations are organized and operated in similar fashion. There are specific rules that apply to the ability to be recognized by the U.S. Internal Revenue Service as an S-corporation. In addition, there are significant differences in the tax treatment of these two types of corporations. These differences will be clarified later in this chapter under the heading “S-Corporations.”
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, other than by electing the directors of the corporation and voting on major corporate issues.
• Directors: : who may be shareholders, but as directors do not own any of the business. They are responsible, jointly as members of the board of directors of the corporation, for making the major business decisions of the corporation, including appointing the officers of the corporation.
• Officers: : who may be shareholders and/or directors, but, as officers, do not own any of the business. Officers (generally the president, vice president, secretary, and treasurer) are responsible for day-to-day operation of the corporate business.
Best Value! Corporation Forms Combo Packages containing the most frequently used corporate forms. Included are combos containing board of director forms, shareholder forms, corporate start-up information and forms, unanimous written consents, resolutions and waivers.
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Popular The central legal document for any corporation is the Articles of Incorporation. In some states, this document may be called a Certificate of Incorporation,... View More
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Popular - The board of directors of a corporation has two main responsibilities. The first is to appoint and oversee the officers who will handle the day-to-day actions... View More
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Business Plan forms designed to provide you with the tools you need when developing and writing your company’s Business Plan. Included are worksheets for a business... View More
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Amendment to Bylaws which will effectively amend a corporation's existing bylaws. This form contains the provisions within the Bylaws to be amended (such as notice... View More
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Bylaws for use when setting up the structure and operation of your corporation. These Bylaws set out the number of directors and officers of the company, how they are... View More
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Dissolution of Corporation form for use when it is agreed that a corporation should be dissolved. This form can be used to voluntarily dissolve the corporation by... View More
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Doctor and Corporation Agreement between a licensed physician and a corporation that desires to engage the physician's services for examinations of company employees.... View More
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Financial Record Keeping Kit which will assist in navigating the often confusing record keeping requirements. This kit contains balance sheets, profit and loss... View More
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Founders Agreement which sets forth the rights and obligations of the founding members of a company. This agreement sets out the company's name and specific role each... View More
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Pre-Incorporation Kit for use by those in the process of filing a corporation. This kit contains worksheets and checklists which will help in determining your... View More
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Popular - Resolutions which cover a variety of situations encountered by a company's shareholders or members of the board of directors. These forms include resolutions... View More
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S-Corporation Status Kit which contains important information regarding S-Corporations. This kit contains notes and requirements for use in filing for S corporation... View More
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Securities Filings and Investor Information containing forms which will assist in filing corporate reports with the Securities & Exchange Commission. View More
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Service of Process form for use in the State of Nevada. This form designates an individual or company to act as resident agent of a corporation, limited liability... View More
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Share Purchase Agreements for use when purchasing shares from an individual or vendor who owns certain corporate shares. These agreements contain all relevant terms... View More
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Popular - The shareholders (also referred to in some states as stockholders) are the persons or other business entities who actually own the corporation. The... View More
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Popular - Corporate stock represents the money or property that is invested in a corporation. It is a representation of the share of ownership in a corporate business.... View More
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Stock Options & Warrants forms for use in creating and maintaining options for your employees to purchase company stock. Included are stock option agreements for... View More
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Popular - Stock Purchase Agreements & Related Documents for use in the purchase of company stock. Included are a stock purchase agreement, equity incentive plan,... View More
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Termination Agreements for use when liquidating or dissolving a corporation. These agreements set forth how liabilities will be divided and how any loans or debts... View More
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Voting Agreements for use when giving a voting trustee the right to vote certain shares held by a shareholder. These agreements set out all relevant terms including... View More
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