So you have started your own business and you want to form a Corporation. What do you do first?
The first step is to form your corporation by filing your “Articles of Incorporation” and pay the filing fee. Once stamped by the Secretary of State’s office, your corporation is in existence. You also need to have Bylaws that govern the day-to-day running of the Corporation. The Bylaws set out the rules and procedures and the conduct of your Corporation. Then you may issue stock to the persons that contributed money to fund the Corporation’s activities and are the “owners” of the Corporation.
Your new Corporation must comply with the State’s law and follow certain formalities to keep the corporate structure. These formalities include holding annual meetings for shareholders (owners) and directors (the Corporation’s governing body known as the Board of Directors). The Secretary for the Corporation should take minutes and record the decisions, especially any important votes and actions. Records of monies spent and used should be kept in a safe place.
There are many advantages to having a Corporation. One of the most advantageous draws is having limited personal liability, which means that an owner’s personal assets and property are protected from creditors and persons that have claims against the Corporation. This protection must be safeguarded which is why it is important to have the correct bans in place. The owners must not use the Corporation as an extension of their own affairs but that they have boundaries. Most importantly, corporate funds need to be kept separate from personal funds or monies from other business entities and affiliates.
The Corporation must file a corporate tax return and pay taxes unless the Corporation is classified as a Subchapter S corporation. This type of corporation files a special form and the Corporation is taxed like a partnership.
Due to specific nuances and changes in the corporate law, it is best to have the formation and on-going compliance that affects a Corporation handled by a legal professional – an Attorney that can guide you through this new chapter.
Michael C. Carroll, Esq., Managing Partner, CorpGen Counsel brings a wealth of securities, governance, M&A, private equity, real estate, transactional, and general corporate law experience to public companies, privately-held companies, private equity firms, and individual clients. Mr. Carroll was previously Senior Vice President, Chief Compliance Officer, and General Counsel of Medallion Financial Corp., a NASDAQ-traded commercial lender and FDIC-insured bank, and was Senior Counsel of Aames Investment Corporation, a NYSE-traded real estate investment trust. Prior to his in-house positions, he practiced in the corporate law department of the international Am Law 50 law firm of Willkie Farr Gallagher, LLP in New York.