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Small Business Notes - What are Articles of Incorporation

Small Business Notes - What are Articles of Incorporation



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Published by: James on Oct 12, 2007
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What are Articles of Incorporation and Articlesof Organization?
The Articles of Incorporation (for corporations) and the Articles of Organization (for LLCs) declarean individual or group to become a corporation or LLC. These documents spell out certainminimum information about the corporation or LLC that is required by the laws of the state inwhich the business entity if formed.
What are Corporate Bylaws and Operating andMember Control Agreements?
Bylaws (for corporations) and members agreements (for LLCs) are documents which govern theinternal workings of the company. Such matters as voting, when meeting are held, how officersand directors are elected or removed, and how the company's owners may transfer their ownership interests, are set forth in these documents.Bylaws and Member Control Agreements are typically not filed with the states and exist solely for the corporation/LLC and its shareholders/members.
What do Shareholders and members do?
The shareholders of a corporation and the members of an LLC are the individuals (or other entities) who have as ownership interest in the company. In many cases these people paid for stock or purchased an ownership interest, providing financial capital for the company to operate.Shareholders and members elect the Board of Directors or Board of Governors (LLC). In smaller corporations, shareholders / members serve on the board or directors/ governors and hold theoffices of the company.
What do Directors do?
The board of directors manages the corporation or LLC and make business decisions. They inturn choose the officers (President, Vice President, Secretary, and Treasurer), whoseresponsibility it is to run the day-to-day operations of the corporation or LLC.Most LLCs don’t have a board of directors as the internal structure is a bit less formal, but LLCscan have boards. In the LLCs we create the members (owners) choose the officers.
How many Directors, Shareholders and Officersdoes a corporation or LLC need?
All states allow a corporation to have one shareholder. Most states allow an LLC to have only onemember.All states allow one person to hold all offices and comprise the entire Board of Directors.
What is a Registered Agent?
A registered agent is a person designated to receive legal notices, services of process, and other official documents delivered to the corporation. All corporations must have a registered agent onfile with the Secretary of State. The address of the registered agent must be a physical address,not a PO box.The person designated to be the registered agent may be an employee, officer, director, or shareholder of the corporation or LLC, or he or she may not be affiliated at all with the corporationor LLC at all.Additionally, the registered agent must be available during normal business hours. If you do NOThave a person who can act as a registered agent in the State in which you are incorporating,Click&Inc can provide one for you simply by clicking on that option during the order process.
What are Shares of Stock? What is par value?Who sets the stock price?
Shares of stock represent the percentage of a corporation a shareholder owns (in LLCs therearen’t shares of stock per se, instead a member simply has an ownership interest, which can butdoesn’t have to be indicated on a certificate). Shares of stock are written articles that representthe amount of money invested in the corporation by an individual shareholder. The corporationdetermines, at the outset of incorporating, how many shares it shall issue and what classes of shares (No Par, Par, Common, Preferred, Participating, etc.) it will issueEach share represents ownership in the company, and it entitles the holder to certain types of rights (voting rights, dividends, etc). A stock certificate is the document which indicates thenumber of shares a shareholder of a corporation owns.
Par value is the minimum amount of money for which a share of stock can be sold. Shares canalways be sold for an amount greater than the par value. Stock that has
no par value
is stockmeans that there is no specific minimum value assigned to it.The stock price is set by the board of directors of a corporation (the managers or members of anLLC would determine the price of ownership in an LLC). Prospective shareholders can purchaseshares for money or obtain them in exchange for goods or services provided to the corporation or LLC.
Do I need a tax ID number?
Yes, all corporations and LLCs must have a federal tax ID number to do business. This number will be required to fill out payroll reports, pay taxes, open a business checking account, etc.IRS Form SS-4 is the one which is used when applying for an EIN number. Click&Inc is the onlyonline incorporation service that drafts the SS-4 for you at no additional charge, regardless of what incorporation package you select.
If I incorporate in Nevada or Delaware (or anyother state) but operate my business in thestate in which I actually live, do I need to alsoregister with my state?
Yes. If you incorporate in State X but operate your business in State Y (where you live), you willneed to register as a foreign corporation in your home state. This will likely require filing out aform and paying a filing fee (usually $100 or less).Each state has different requirements as to when a corporation must register and includesituation where you have an office, sales representatives, etc. Check with the state in which youwant to register as a forgiven corporation ensure the proper requirements are satisfied.For more information on when you may need to file as a foreign corporation read the answer toquestion #19 below.
Do I need a Corporate Seal?
This may be one of the most misunderstood elements of any incorporation. The fact is, you willrarely, if ever, need a corporate seal. Corporate seals are the embossed stamps that contain thename of a corporation and it’s date of formation. No state’s require corporate seals any more.Many online incorporation sell corporate seals because there is a high profit margin...and for noother reason. You don’t need a corporate seal, but if you really want one, we have high quality,steel ones for just $45.To order one go towww.corporate-seal.net.If any online incorporation service tells you that you need a corporate seal, run away as fast as you can.
What do I have to do on an Annual basis?
Your corporation will have to file an annual tax return (IRS Form 1120 or 1120S). Annual taxreturns are also filed by sole proprietorships (Schedule C to IRS Form 1040), limited liabilitycompanies (IRS Form 1065) and general partnerships (IRS Form 1065).Almost all states require all business entities to file an annual report each year which updates theaddress of the corporation, its officers and directors, and its registered agent for service of process. There is a small fee (in most cases).Finally, Click&Inc suggests that you consult your accountant for any additional informationrequired for filling out corporate tax returns, quarterly tax payments, employment payroll records,etc.
Does it matter where (in which State) Iincorporate?
Not really. Incorporating in a state other than the one where you live and work will generallyinvolve additional costs. You must have registered office / registered agent in the state in which

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