Forming a Corporation

Hierarchy of corporate laws

1) US constitution 2) state constitutions 3) articles of incorporation 4) bylaws 5) contracts

Organizational minutes, the to do list at a first meeting

1) adopt a minute book 2) approve bylaws 3) approve the form of stock certificate 4) elect officers 5) approve salaries and employment contracts 6) issues/sell stock 7) authorize the payment of costs/fees 8) adopt the bank resolutions for deposit accounts.

incorporation checklist done after incorporation

1) advertisement 2) purchase corporate kit which includes minute book, seal, stock register book 3) prepare bylaws 4) prepare organization minutes 5) IRS ID number 6) tax filings 7) insurance 8) complete kit, employment contracts and leases etc.

Incorporation checklist to mail to secretary of state

1) articles of incorporation 2) docketing statements (3) 3) filing fee 125$ 4) post card/ extra copy 5) cover letter

Authorized shares

1) articles of incorporation must prescribe the classes of shares and the number of shares of each class that the corporation is authorized to issue.

Articles of incorporation must set forth the following four things:

1) corporate name 2) number of shares corporation is authorized to issue 3) street address 4) name and address of each incorporator.

You need to know when an even occured

1) did it occur before the corporate filing date? then individual likely liable 2) if it occurred after the corporate filing date then individual likely not liable.

Where to Incorporate

1) if a corporation will do business in one state incorporate there. 2) if a corporation will do business in many states consider the tax and corporate laws of each state and most likely choose delaware.

A corporations power to act may be challenged:

1) in a proceeding by a shareholder against teh corporation to enjoin the act 2) in a proceeding by corporation directly, derivatively, or through a receiver, trustee, or other legal representative, against an incumbent or former director, officer, employee, or agent of the corporation; or 3) in a proceeding by the attorney general under section 14.30

Corporate Name

1) must contain the word corporation, incorporated, company, limited or like abbreviations 2) may not contain langague stating or implying that the corporation is organized for a purpose other than permitted by MCBA and the articles of incorporation 3) must be distinguishable upon the records of the secretary of state.

Summary of Articles of Incorporation

1) name must be distinguishable and cannot be confusingly similar in PA 2) existence begins @ time of filing 3) druation is forever 4) purposes 5) registered office 6) registered agent 7) initial directors 8) incorporators 9) Initial capital 10) Shares of stock

Optional Articles of Incorporation

1) names and address of initial directors. 2) provision not inconsistent with the law concerning 3) any provision that under the act is required or permitted to be set forth in the bylaws.

The birth of a corporation

1) the corporation existences begins when the articles of incorporation are filed. --date the corporate shield goes up 2) secretary of state's filing of articles of incorporation is conclusive proof that the incorporators satisfied all necessary conditions precedent to incorporation. 3) cannot be incorporated in more than one state.

If initial directors not named in the articles:

1) the incorporators shall hold an organizational meeting at a call of a majority of the incorporators to a) elect directors and complete the organization of the corporation b) elect a board of directors who shall complete the organization of the corporation.

Registered Office and registered agent: each corporation must continuously maintain in this state:

1)a registered office that may be the same as any of its places of business and 2) a registered agent

True or false, generally the lawyer does not act as the incorporator.

False, generally they do, however, they are less inclined to be elected to the board of the corporation due to risk of liability.

Organization of corporation : after incorporation

If initial directors named in articles, shall hold an organization meeting at the call of the majority of the directors, to complete the organization of the corporation by appointing officers, adopting bylaws and carrying on any other business brought before the meeting.

True or false, unless otherwise provided every corporation has perpetual duration and succession in corporate name and has the same powers as an individual to do all things necessary and convenient to carry out its business and affairs.

True, they can sue, be sued, own property, sell property, open accounts etc.

Purposes (default)

a) every corporation incorporated has the purpose of engaging in any lawful business unless a more limited purpose is set forth in the articles. b) a corporation engaging in business that is subject to regulation under another statute of this state may incorporate under this Act only if permitted by, and subject to all limitation of, the other statute.

Bylaws

a) the incorporators or board of directors of a corporation shall adopt initial bylaws of the corporation. b) bylaws may contain any provision for managing the business and regulating the affairs of the corporation that is not inconsistent with the law of the articles of incorporation. c) bylaws are not a matter of public record but articles are.

Provision not inconsistent with the law concerning:

a) the purpose or purposes for which corporation is organized. b) managing the business and regulating the affairs of the corporation c) defining, limiting and regulating the powers of the corporation, its board and shareholders d) a par value for authorized shares or classes of shares e) imposition of personal liability on shareholders for the debts of the corporation to a specific extend under specified conditions.

minute book contains

articles, copy of docketing statement, proofs of publication, stamped page as official seal, sample stock certificate, by laws, organizational minutes, employment contracts, buy/sell agreement.

Minute book

corporate diary, use a blank one

General powers -default

corporation powers are same as an individual unless otherwise specified in articles.

True or false a lawyer may not be a registered agent

false, the lawyers may offer to do this and it is a way to get future business.

Promoter

includes a person who is acting alone or in conjunction with one or more other persons, directly or indirectly takes initiative in founding and organizing the business or enterprise of an issuer.

seal

no longer required in PA but is still recommended.

Incorporators MBCA Section 2.01

one or more persons may act as the incorporator or incorporators of a corporation by delivering articles of incorporation to the secretary of state for filing. 1 or more person may act as incorporators.

The street address must contain

the corporations initial registered office and the name of its initial registered agent at that office.

true or false if more than one class of shares authorized articles must prescribe distinguishing designation for each class.

true

True or false, alway wait untill articles are acepted before you advertise

true! this is an exam question.

True or false, always use by when signing on behalf of someone.

true, by forgetting by you would have a problem.

True or false, the key to filing is the receipt by the secretary of the commonwealth.

true, it has the date and time stamp which is the date and time in which the corporation begins.

True or false there is no federal law on corporations

true, it is up to the individual states to set the standard.

True or false for the corporation to be bound by a promoter contract, the corporation must adopt novation the contract.

true, the corporation cannot ratify a contract entered into before the corporation was formed.

True or false a lawyer may act as the incorporator.

true, usually once the incorporation is complete the baton is passed.

true or false, whatever is put in the articles is the limit

true, would have to amend articles of incorporation to add more.

True or false the word persons include natural persons, corporation and business organizations

true.

True or false the promoter has a fiduciary duty to both the corporation and its members

true. They also have a fiduciary relationship with co-promoters.

class of shares

types of stock

When you have an exam question where somebody in a corporation may be liable for something, the first thing to ask is:

whether the person is a promoter, shareholder, or officer, or all three?