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Do-It-Yourself Incorporation Kit: Washington State Corporation
By Stephen L. Nelson, CPA, MBA (finance), MS (taxation)
This Do-It-Yourself Guide was written to share basic information about formation of corporations and their taxation. The paper is not intended to replace the services of a competent legal, tax or business advisor. If legal or other expert assistance is required, the services of a professional should be sought. Furthermore, while both the publisher and author have made every effort to offer the most current, correct and clearly expressed information possible, inadvertent errors can occur and the rules and regulations governing corporations, c corporations, s corporations, accounting standards, and tax laws often change. Further, the application and impact of rules and laws can vary widely from case to case based upon the unique facts involved. Be careful! CIRCULAR 230 NOTICE: Under recently issued IRS regulations, we must inform you that any U.S. tax advice contained in the body of this white paper was not intended or written to be used, and cannot be used, by the reader for the purpose of avoiding penalties that may be imposed under federal tax law. By regulation, a taxpayer cannot rely on professional advice to avoid federal tax penalties unless that advice is reflected in a comprehensive tax opinion that conforms to strict requirements.
Copyright 2008 Stephen L. Nelson, Inc. and Fast Easy Incorporation Kits
Copyright © 2007, 2008 by Fast Easy Incorporation Kits web site
In this document, I describe how you can, on your own and without the help of an accountant or attorney, set up a Washington state corporation. Specifically, I provide step-by-step instructions for completing several legal and tax documents related to forming a Washington state corporation, including filing the articles of incorporation with the Washington secretary of state, applying for an Employer Identification Number (EIN) from the Internal Revenue Service, and preparing the S corporation election paperwork which some corporations may choose to file with tax authorities in order to have their corporation treated as an S corporation. Before that discussion, however, I want to talk briefly and in general terms about the legal and tax benefits of a corporation so you can understand better whether incorporation is appropriate in your situation. I also want to provide some basic information about how corporations are taxed. One other comment: This document also includes a sample set of corporate by-laws (see Appendix A) written by attorney Carl Baranowski. You will need corporate by-laws for your corporation. Ideally, you would have a local attorney, conversant in Washington state corporation law and intimately familiar with your business, start with boilerplate corporate by-laws (like those provided in Appendix A) and then customize them so they work for your situation. Practically speaking, many small business owners end up instead using simple sample sets of corporate by-laws as their “real” by-laws. The simple approach ends up saving you money, but the simple approach probably also reduces the legal liability protection. Accordingly, at some point, if legal liability protection is paramount and your budget allows, you should consult with a local attorney. And now on to the meat of our discussion…
The Twin Benefits of a Washington Corporation
Corporations deliver two huge benefits to Washington business owners. One benefit is a legal benefit and the other is a tax benefit.
Benefit One: Limited Liability…
The big legal benefit that corporations provide business owners with is liability protection. What this means, practically speaking, is that the business owners are not liable for the debts of the business merely by virtue of their ownership.
Copyright © 2007, 2008 by Fast Easy Incorporation Kits web site
To best understand what this limited liability protection means, however, you need to consider the situation that exists with respect to businesses that are un-incorporated. In a sole proprietorship, for example, the proprietor is responsible for all the debts of the business. If the business signs a contract with some customer or vendor and then breaches the contract or if the business fails to deliver on a financial promise made to some employee, the owner is liable. The owner can’t say, “Oh, sorry, that was my business that made the promise or commitment.” A business organized as a general partnership works the same way. If the business breaches a contract or makes and then breaks a financial promise, the partners in the partnership are liable. These owners can’t say, “Oh, sorry, that was the partnership… not me.” In comparison, with a corporation, an owner (called a stockholder or shareholder) can say, “oh, sorry, that was the corporation’s debt… not mine.” Consider what this means for a small business. In a worst case scenario, outside creditors (these outside creditors would obviously include people like the bank and vendors but might also include other people or organizations that you owe money to like customers and employees) might be able to strip the corporation of all its assets to pay a debt or force the corporation to liquidate to pay it debts. But these outside creditors would not be able to look to the corporation’s owners for repayment merely because they own the corporation. Obviously, the legal liability protection provided by a corporation can be extremely valuable. One local attorney I often collaborate with tells his clients that a corporation (as well as its cousin, the limited liability company) protects businesses and investors from the worst case scenario—which in his mind is a “slip and fall” accident on the business’s or investor’s property. With a corporation as the property owner, so says my attorney friend, the “worst case scenario” is liquidation of the corporation. That liquidation means the people who own the corporation wind up with nothing—which isn’t good. But all the owners lose is what they’ve invested in the corporation. In comparison, without a corporation, the business owner’s or investor’s “worst case scenario” if there’s a “slip and fall” accident is that the owner or investor can lose almost everything they own.1 In other words, the business owners or investors could lose not only their investment in the business but many other personal assets. Let me issue a caveat here, however. You may not get as much legal liability protection from a corporation as you want or hope. Say, for example, that you’re a roofing contractor operating as a corporation. If you personally happen to drop a hammer onto the customer’s head during the roofing project, your corporation probably won’t protect
A tangential side note: Even in the worst case scenario, you typically can’t really lose everything. State and federal laws often protect individuals from the claims of creditors. For example, retirement savings may be protected, as well as a certain amount of equity in a home, and even many personal belongings.
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The first potential tax saving associated with incorporating your business applies to what the tax laws call a C corporation. for example. And this is true even if the only employee is a shareholder. A business owner might give a personal guarantee to a bank or vendor that says. The customer might reasonably argue that you should have done a better job managing the employee or subcontractor. You may be able to buy an hour or two of time from a good local attorney and get all your corporation and liability-related questions answered. small business corporations provide two tax benefits to their owners. in effect. Benefit Two: Potential Tax Savings… A second benefit of corporations relates to the income and payroll taxes that a business pays or that investors pay. a modest amount of life insurance. But you may still be personally responsible as the manager of the person dropping the hammer.” Or a business owner might. which makes things murkier. I will personally pick up the tab. 2008 by Fast Easy Incorporation Kits web site . and so on. In other words. the corporation can provide benefits such as medical insurance. Finally. employee housing (in some cases). An attorney knowledgeable in Washington state business law can help you increase the liability protection that you gain from using as corporation for your business or investing. the customer can probably look not only to your corporation for payment of damages related to the dropped hammer but also to you personally. And here’s another example. business owners may intentionally or unintentionally do things that remove or weaken the legal liability protection that a corporation provides. “I guarantee that my corporation will satisfy all of its obligations to you and if it doesn’t. A C corporation (but not an S corporation which I discuss next) can typically provide tax-free fringe benefits to all of its employees. drops a hammer on the customer’s head? The corporation may offer you some protection in this case. reimbursement of medical expenses. through his or her actions—such as wanton disregard of the corporation’s separate identity or failure to comply with state corporation law—weaken the liability protection provided by a corporation. If you’re extremely concerned about the asset protection features of setting up and operating a corporation. As a general rule. In other words. What happens if someone working for you. The cost of these benefits generally count as business deductions for the corporation as long as the corporation doesn’t discriminate in favor of shareholders and as long as the expenses are “ordinary and necessary” business expenses or expressly authorized as Copyright © 2007.you from that sort of tort liability. regularly get an attorney involved in your business or investment planning. Here’s what all this means. And this consultation doesn’t need to be particularly expensive. one of your employees or subcontractors.
) Copyright © 2007.000 in tax on the first $100. Subchapter S status.000 a year in tax-free fringe benefits to that employee.000 of employment taxes. But—and here’s the neat thing—the deductions aren’t taxed to employees.000 on the second $100. would not be taxable to the employee. while tax deductions for the corporation. In addition to income tax.000 in tax on the first $100. suppose a sole proprietor.000 in corporate profit as salary—and this would probably be the most common approach for a small business—the shareholder (either directly or indirectly) also pays roughly $15. Note: In the case of a sole proprietorship or partners in a partnership.000 and $10. note that these employment taxes are in addition to the income taxes he or she pays on the $200. To show you how the employment taxes work. (Those income taxes probably total another $30.000 of profit. each business owner also pays an employment tax equal to roughly 15% on the first $100. In a situation where a one-employee-one-shareholder corporation provides full health benefits and housing to its single shareholder-employee. Tax-free fringe benefits.000 of profit.000 of business profit and $3.000 in a year. you need to understand a thing or two about the payroll taxes that self-employed people (like sole proprietors and partners in partners) pay and that regular C corporations and their employees pay. the corporation might be providing $20.000 of business profit. Caution: If you want to explore or exploit the tax-free fringe benefits angle in more detail. the business owner pays roughly $18. money that a business owner makes in an active trade or business is not subject just to income taxes. though.000 each year. allow a small corporation’s owners to enjoy some of their business profits tax free. In a nutshell.000.000 or $30. the employment taxes are called self-employment taxes. This proprietor or partner will pay roughly $15. and he or she will pay roughly $3. a partner in a partnership. To understand this benefit. In all three of these cases. the employment taxes are called Social Security and Medicare taxes.000 of business profit. Again.000.000 of profit and then roughly 3% on any profit above $100. In the case of a shareholder-employee in a corporation. and I’m being a little rough here. And this would mean that the annual tax savings would very likely run between $5. or a single shareholder in a regular corporation (called a C corporation by tax laws) makes $200. Yet those benefits. A corporation also affords its owners a second potential tax saving opportunity.deductions by tax laws. you definitely want to confer with a local tax practitioner—an accountant or attorney who can help you identify which tax-free fringe benefits make the most sense in your specific situation.000 or $40. If the single shareholder-employee extracts all of the $200. then.000 on the second $100. 2008 by Fast Easy Incorporation Kits web site .
You will need to print new letterhead. extra payroll tax (the Federal Unemployment Tax). accounting and insurance costs.000 an employer pays individual employees in wages. The accountant and insurance company may.000 in wages. This tax equals as much as 6.Things work differently if the corporation elects to be treated as a Subchapter S. or S. The bank may charge $10.2% of the first $7. In this case. $20.000 annually. Perhaps this means wages equal to $60. you may spend money on publications like this. there are costs and headaches associated with incorporating. corporation. or $434 per employee. the corporation probably sets the shareholder-employee’s wages to a low but reasonable level. a partnership or a C corporation.000. In this case. or $9.000 annually. 2008 by Fast Easy Incorporation Kits web site . A corporation may involve several hundred or even a few thousand dollars of startup expense. Copyright © 2007. the bank account for a corporation probably won’t be free. a corporation will probably increase your banking. Related to this point. For example. While a sole proprietorship or informal real estate partnership may be able to keep its bookkeeping and income tax return preparation very simple. an S corporation saves the shareholder-employee roughly $9. while the bank account for a sole proprietorship or informal partnership may be free if you keep a large-enough balance. similarly. making an owner a corporate employee results in a new. business cards. you will pay either $175 or $195 to file your articles of incorporation with the state and then pay another $59 each year to maintain your register. Further. For example. And this tax return may cost anywhere from a few hundred dollars to a few thousand dollars annually. The Drawbacks of the Corporation When you consider the benefits of a corporation—limited business liability and tremendous potential tax savings—you seemingly have almost the perfect business entity choice. For starters. or even more each month. As compared to the case where the same business makes $200. So an obvious question is “Why wouldn’t everyone become a corporation?” Perhaps predictably. and envelopes (if you use these) that use the new corporation’s name in order to show the world that you’re now operating as a corporation. bump the prices they charge you.000 a year but is operated as a sole proprietorship. You may buy the services of accountants and attorneys. a corporation needs to file its own tax return. Another increase in administrative complexity is that the corporation will need to do quarterly and annual payroll tax accounting—even if the only employee is the owner. the employment tax equals 15% of only the $60.
Obviously. as part of the incorporation. no tax effect should occur merely because the partnership has become a corporation. And the control requirement is met when a partnership incorporates a partnership.Finally. again. A Slightly Different Set of Tax Rules… I also want to briefly summarize here the rules about how corporations are taxed. meeting the “control after incorporation” requirement may not be quite so easy. no tax effect should occur merely because the proprietorship has become a corporation. Here’s why: When someone contributes property to a corporation in exchange for the corporation’s stock—this is what happens when you incorporate a business—that transaction is technically an exchange. Similarly. if a partnership incorporates its business. You’ll also need to keep good minutes of these meetings. a corporation will mean that you need to have a board of directors (which will need to meet regularly such as monthly. If the people incorporating the business control the business after the incorporation—control means they own at least 80% of each class of stock in the new corporation—the transfer of property for stock that occurs during the incorporation isn’t taxable. But I can give a birds-eye view of the subject—especially as tax laws apply to small businesses and how they differ from the simpler rules for sole proprietorships and small partnerships Starting a Corporation You can usually incorporate a business without suffering any tax effect. 2008 by Fast Easy Incorporation Kits web site . And exchanges represent taxable events unless tax laws say otherwise. For example. however. in any situation that isn’t like one of the preceding examples. And you will need to comply with either your corporate by-laws or state law as far as giving directors and shareholders advance notice of these meetings. Obviously. quarterly or annually) and annual stockholders meetings. Fortunately. transfers liabilities to Copyright © 2007. the control requirement is met when a proprietor incorporates his or her business. In other cases. If a sole proprietor or partnership incorporates a business and. You may need to consult a tax practitioner. tax laws do “say otherwise” in the typical cases of a sole proprietor or partnership incorporating the business. such as where you’ve got a larger group of people who are contributing property to the corporation in stages. if a sole proprietor incorporates his or her business. Let me also make one other point about incorporating a business. I can’t summarize all of the tax law applicable to corporations in a few paragraphs.
001 to $335. the transferred liabilities ($10. a corporation counts income and deductions the same way that a sole proprietorship or partnership does.000 – taxed at 39% $335. 2008 by Fast Easy Incorporation Kits web site . the excess of the liabilities over the basis of the property gets counted as income or gain. for example. The mechanics of how this works are beyond the scope of this short discussion. But the effect is pretty easy to describe: The exchange in this case looks to the tax man like a sale. get taxed on their income.333.000) exceed the basis of the property contributed ($0). a person offloads personal debt into the corporation—such as credit card debts that stem from personal charges—all of the liabilities transferred are considered (essentially) as payment made (or boot paid) by the corporation for the property contributed.333 – taxed at 35% Copyright © 2007.000 – taxed at 34% $10.000 – taxed at 34% $100. For this reason. For example.000.000. suppose someone starts a corporation solely by contributing a fully depreciated truck and that there’s a bank loan on the truck equal to $10. many small corporations attempt to extract all of the business profits in the form of salary. as part of incorporating a business.000. transferring liabilities as part of incorporation triggers taxes in two cases: Case #1: If.001 to $75.001 to $10. How C Corporations Get Taxed Regular corporations. Case #2: If a person offloads more debt into the corporation than the depreciated basis of the property contributed to the corporation. Specifically.333. the business needs to count that income in its accounting records. corporate income is taxed according to the following tax rate schedule: $0 to $50.333 – taxed at 38% Over $18. that transfer of liabilities may trigger taxes. In this case. The person contributing the truck gets taxed on the $10. Corporation Income and Corporation Deductions As a generalization.the corporation.000.000. At the time I’m writing this.000 – taxed at 25% $75. Anytime the corporation earns or receives income.001 to $15.001 to $18. called C corporations.001 to $100. and the person contributing the property and transferring the liabilities will probably be taxed on the liabilities contributed.000 – taxed at 15% $50.000 – taxed at 35% $15. Anytime the corporation incurs or pays some expense that is ordinary and necessary for its business. the business can count that deduction in its accounting records.000.
for example.000 of profit is apportioned to Nevada and $50. The apportionment formula apportions one third of the profit—another $100. If you work out the math. $50. those shareholders pay tax on the dividend. Suppose a corporation (and it doesn’t matter whether the corporation is a C corporation or an S corporation) makes $300. that if the corporation pays a dividend to its shareholders out of its profits. if the corporation has half of its property in Nevada and half of its property in California. Corporate dividends paid by a C corporation generally get taxed at a 15% rate. too. or $100. a 25% tax on the next $25. for example. For example.A corporation that makes $100. if the corporation’s payroll is evenly split between Nevada. pays a 15% tax on the first $50. The three-factor apportionment formula apportions one-third of the $300. Copyright © 2007. the corporation pays $22. A quick editorial comment: The idea of incorporating a business in another state is often touted by people who don’t understand how multi-state corporate taxation works.000. of the profit. does business in other states that tax corporate profits. and a 34% tax on the last $25. that a Washington business. 2008 by Fast Easy Incorporation Kits web site .000.000.000. For example. If a corporation operates in multiple states. Note.000. But business owners need to understand that if a corporation owns property. Here’s a simple example of how this works.000 of profit.000 of profit is apportioned to California. Suppose. Washington and Oregon.000 of profit is apportioned to each of these four states. or makes sales in a state. Finally. which is also a Washington corporation. State Taxation of Corporations A corporation also pays state income taxes on the profits it earns in a state (if the state taxes corporate profits).000. $25. employs people.000 of profit is apportioned to Washington. the corporation generally owes taxes to that state—either income taxes (which most states charge) or gross receipts taxes (which Washington state charges).000. then another $50.750 in corporate income taxes on the first $100. the business still owes those states income tax on its profits. based on the states in which the corporation owns property. for example. the apportionment formula apportions one third of the profit—the final $100. California.000 of profit is apportioned to California and $50. the corporation apportions its profit—usually using something called a three-factor formula.000—based on the payroll paid in the states where the business employs people.000—based on the states in which the corporation sells its products or services. In this case. If the corporation makes half of its sales in California and half in Washington.
Stopping a Corporation If a corporation stops doing business. and then distributing all of the cash that’s still left over to the shareholders. In my opinion. or LLC. Balancing the Benefits of Incorporation with the Drawbacks So where does all this leave you? How should you balance the big benefits of forming a corporation with the extra administrative complexity and the burden of more complicated and extra accounting? Unfortunately. After the previously taxed profits are exhausted and to the extent of any capital contributed to the corporation. gives you all the same liability protection. as part of stopping business. a corporation distributes property rather than cash. On the other hand. Or alternatively. any business that’s producing profits that equal or exceed what the owner would earn if he or she worked as an employee for someone else probably should operate as a corporation or as an limited liability company2. 2008 by Fast Easy Incorporation Kits web site . the corporation recognizes a gain or loss equal to the difference between the property’s fair market value and the basis of the property to the corporation. For example. the shareholders need to liquidate the corporation by selling all of the corporation’s assets. For example. In essence. the shareholders pay regular dividend tax rates (usually 15%) on the money. In these cases. so I won’t bang the LLC drum again. but burdens you with less red tape. an additional tax benefit (flexibility). the part-time business that generates a few thousand dollars of profit probably is not big enough or risky enough to shoulder the hundreds of dollars of cost (or more) incurred in setting up and operating a corporation. One final note: If. the shareholders get tax-free returns of capital. Copyright © 2007. If the corporation distributes still more money to a shareholder—money above and beyond the previously tax profits and the original capital contributions—those distributions are taxed at capital gains tax rates (usually 15%). however. I can’t give you a one-size-fits-all answer. As an added bonus. the corporation economically reduces business risk. think that the limited liability company is often a better choice for small businesses than a corporation. presumably you’ve already read this sort of comment from me before. 2 Most business advisors. paying off all of the corporation’s debts. a limited liability company is a “lite” version of a corporation. You’ll need to carefully consider the benefits and costs as they add up in your specific situation. if the corporation distributes appreciated property (like real estate) to a shareholder. the corporation pays tax on the appreciation. me included. the incorporation option is uneconomical for very small businesses. a C corporation can often produce tax savings to the business owner because shareholder-employers can get tax-free fringe benefits. an S corporation can often save the owners thousands of dollars a year in income or payroll taxes. A limited liability company. That said. To the extent that distributions made to shareholders come from previously taxed profits. I will share these thoughts.
or web page address.aspx The online form looks and works in basically the same way as the paper form. you’re ready to fill the form out. Here’s what you do: 1.wa.pdf Note: You can also work with an online version of this form. and you want to be easily reached by them in case there’s a question or two about your application. The box you enter your name in is labeled. Day Phone Number (With Area Code). Copyright © 2007. http://www. Provide your name and phone number to the Secretary of State’s office. and then print this form.secstate. you’ll be able to see if there’s another business already using the name that you want. You can’t use a name that’s the same or deceptively similar to another existing corporation’s name.wa. Important – Person To Contact About This Filing. After you download and print the profit corporation application form.gov/corps/eforms_notice.secstate. 3. Your first step in setting up a corporation is to check if the name you want to use is even available. which is also available at the Secretary of State’s web site at: http://www.gov/corps/ By entering the name you want to use in the search form.gov/corps/forms/profit. At the top of the application form. Check if the corporation name you want is available. for this form (see Figure 1) is as shown below. 2.secstate. The box you enter your telephone number in is labeled. 2008 by Fast Easy Incorporation Kits web site .wa. Download the Application to Form a Profit Corporation from the Washington Secretary of State’s Corporation Forms web site.Forming the Washington State Corporation The actual steps you take to form a Washington state corporation are almost comically simple. you can see boxes to enter your name and telephone number. The URL. The state may call you about your application. you can use the Washington Secretary of State’s corporations search form at: http://www. To do this.
Indicate the number of shares the corporation is authorized to issue.” “Co. Specify the effective date of incorporation. your new corporation will issue only regular. As the labeling of the box indicates. 6. Indicate the classes of stock the corporation issues. you should confer with an attorney.. you also mark the Preferred check box and then attach a description of the preferred stock. In the area beneath the Name Of Corporation box.” “Inc. if you’re taking a do-it-yourself approach to incorporation. You should not (in my opinion) use a do-it-yourself approach. so mark the Upon Filing By The Secretary Of State box. 2008 by Fast Easy Incorporation Kits web site . you just want to form the corporation as soon as possible. 7.” “Corp.4.. Acme Explosives Co. Use the Effective Date Of Incorporation box to specify whether the corporation should be formed on some future date or when the Secretary of State files the articles of incorporation application. Presumably. If you will also issue preferred stock. Acme Explosives Inc. Acme Explosives Ltd. Usually. a preferred stockholder might get paid dividends before common stockholders or might receive preference over common stockholders in the event the corporation is liquidated.” For example. As this box’s label indicates. you mark the Common check box. common stock owners. or common. Preferred stock owners enjoy preferences over the regular. I will tell you that if you’re complicating your incorporation with these kinds of issues. For example. enter the number of shares the corporation is authorized to issue. all of the following names should be acceptable: Acme Explosives Corporation Acme Explosives Incorporated Acme Explosives Limited Acme Explosives Corp. the name must include one of the phrases or acronyms.” “Incorporated. stock as well as preferred stock. Copyright © 2007. common stock. In this case.” or “Ltd.. 5.” “Limited. you must have at least one share in the company. “Corporation. Enter your business or investment name into the box labeled. Name Of Corporation. hopefully. A corporation can have both regular. Identify the name you want to use for your new corporation.
9.8. completed Washington state Application to Form a Profit Corporation. To provide this information. Washington State wants to know the name and contact information for a real person within the state of Washington that the state can contact if it has questions or concerns about the corporation or its operation. Identify the People Forming the Corporation Washington State also wants to know the names and contact information for the person or people incorporating. Then sign on the line labeled Signature Of Agent. You can pay someone else to be this registered agent. enter the names and addresses of the organizer or organizers into the boxes labeled. Identify the Registered Agent. but it’s really easiest and cheapest to just be your own registered agent. Names Addresses Of Each Incorporator. enter your name and address information into the boxes labeled Name And Address Of Washington State Registered Agent. surely) needs to sign and date the application at the bottom of the form where indicated Figure 1 shows an example. 2008 by Fast Easy Incorporation Kits web site . Copyright © 2007.” One of the incorporators (this will be you. Accordingly.
Figure 1: An example completed application to form a Washington profit corporation. 2008 by Fast Easy Incorporation Kits web site . Copyright © 2007.
Electing Directors and Officers After the secretary of state certifies your corporation—and at this point. 3. At this initial board meeting. In general. among other items. which simply means that someone (perhaps you) contributes cash or property to the corporation and then you simply keep a record of the stockholder’s shares as part of your corporate records. You need to issue stock to the shareholders contributing cash or property. via a formal board resolution. a second copy of the completed form and a check for $175 to: Corporations Division 801 Capital Way South P. Your board of directors needs to hold a board of directors meeting at which. but the incorporation date shows as the day you apply. you can use uncertificated stock. Online filing of the application to form a profit corporation costs an extra $20. You need to follow your corporate by-laws as to how this process works. when you form a corporation online it takes a few days for the corporation to appear as formed within the state’s records. the board elects officers to the roles of president. The sample corporate by-laws do allow you to use uncertificated stock. your corporation legally exists—you still need to perform three other startup tasks: 1. 2008 by Fast Easy Incorporation Kits web site . you may also want to have the board. secretary and so on. 2. or $195 in total. however.10. And especially in the case where you are setting Copyright © 2007. Mail in the Profit Corporation Application After you complete the Application to Form a Profit Corporation. you adopt your corporate by-laws and elect directors to the board. Issuing Stock. vice president. Adopting By-laws. approve setting up a bank account and make specific persons the signers on the account. mail the completed form. The incorporator or incorporators (this is probably either you or you and the other founders) need to hold an organization meeting. As a generalization. Tip: You can also form a corporation online using the web address provided earlier.O. Box 40234 Olympia WA 98504-0234 Processing lead times vary. but in general it takes several weeks to get your incorporation papers and certificate back from the Secretary of State’s office. treasurer. At this meeting.
Tip: If you want to use stock certificates. for your new corporation.dol. In addition. Copyright © 2007.htm You can get local city business license information by calling city government offices in the town in which you plan to operate your business. Licensing a Business in Washington As you probably know if you’ve worked or run a business in Washington. 2008 by Fast Easy Incorporation Kits web site . Accordingly. Caution: The IRS takes up to two weeks to make your new EIN part of its permanent records. and file any tax returns required for your corporation such as income tax returns and payroll tax returns. stock for which you don’t issue stock certificates—is probably easiest.gov/forms/700028. If you’ve set up a corporation for a business. or EIN. written records of all the preceding activities and events and act according to your corporate by-laws. identifies your business entity and often allows you to do things like open a bank account.wa. uncertificated stock— in other words. the local office supplies store probably carries or will allow you to order blank stock certificates and (if you want or need it) a corporate seal to “seal” the certificates. Until your EIN is added to the permanent records. Getting an EIN for Your New Corporation You will need to get an Employer Identification Number. An observation: Keep formal. you’ll want to identify and then acquire the necessary permits and licenses. You can get to the first page of an online master business license application form at the Washington State Department of Revenue web site using the URL shown below: http://www. apply for business licenses. many cities also have business permit and license requirements. you can't file an electronic return. if you do need an EIN. An EIN. make an electronic payment. apply as soon as possible! Applying for a New EIN using the Online EIN Application The easiest way to get an EIN number is through the interview-style. also known as a Federal Tax Identification Number.up a one-shareholder corporation which you will own and operate. online EIN application. or pass an IRS Taxpayer Identification Number matching program. Washington State requires a master business license of businesses that operate in the state.
gov/modiein/individual/index. When the online EIN application says "You have chosen Corporations" and asks what type of corporation.Friday 6:00 a. the IRS makes its online EIN application available according to this schedule: Monday .jsp Scroll to the bottom of the page and click the “Begin Application” button.m. you do not need special software to complete the online EIN application.m. 2008 by Fast Easy Incorporation Kits web site . click the "S Corporation" button. also known as a C corporation. Eastern time Sunday 7:00 p. Eastern time Saturday 6:00 a. At the time I'm writing this (spring of 2008). Eastern time Fortunately. click the "Corporations" button.m. Identify the legal and tax structures of your business entity. click the "Corporations" button. This step is very important because each type of legal and tax structure has different rules and regulations. click the "Corporations" button.www4. What's more. you also do not need special computer skills to complete the online EIN application.m. to 12:30 a. you can click on it to see a definition in a new window. to 12:00 a. Go to the IRS website. 2. The online EIN application asks questions and you simply provide the answers by filling in the blanks and checking boxes and buttons. When the online EIN application says "You have chosen Corporations" and asks what type of corporation. to 9:00 p.m. Clicking on these definitions will not halt the progress of your application. Here are the precise steps for completing the online EIN application: 1.The online EIN application is not available 24 hours a day. Note: The IRS web site supplies definitions for most of the terms used in the online EIN application.irs. Copyright © 2007. If your new corporation will be treated for tax purposes as a regular corporation. Go to the IRS online EIN application web page to begin the EIN online application: https://sa2. If a word or phrase appears blue and underlined. All you need to have is Internet access and a current Internet browser.m. as well as tax reporting requirements. If your new corporation will be treated for tax purposes as an S corporation.
the online EIN application brings you to a page that explains your choice. Copyright © 2007. they send the letter to the corporation in care of the person. including name and Social Security or Individual Tax Identification Number. if you use a middle initial.After you indicate what type of legal and tax structure you've chosen for the new entity. Note: If the contact person is a nonresident alien and therefore doesn't have a Social Security Number. Your choices are: § § § § § Started a New Business Hired Employees Banking Purposes Changed Type of Organization Purchased Active Business In general. Click the “Continue” button. The IRS considers the contact person to be the individual or business responsible for tax matters. you should identify a corporation officer (probably the president or treasurer) as the person the IRS should contact when it has questions. you will click the “Started a New Business” button. for example. When prompted by the online EIN application. explain why you are requesting an EIN. If the IRS sends a letter to the corporation. Identify and describe a contact person of the corporation. Application for IRS Individual Taxpayer Identification Number form. 3. do not place a period after that initial. Go to the bottom of this page and click the “Continue” button. the person may be able to first obtain an Individual Tax Identification Number by completing a Form W-7. The IRS also wants information about the principal officer. State why you are requesting an EIN. owner or general partner. Click “Continue” after you identify the type of primary member or principal officer. In a small corporation. 4. For instance. 2008 by Fast Easy Incorporation Kits web site . You need to designate a contact person--or what the online EIN application calls a principal officer. Don't use any punctuation other than a hyphen (-) and ampersand (&) in the name.
Click the “Continue” button. Copyright © 2007. If you do. You will also be required to provide a phone number. etc). Use the pull-down menu to select a month and year. You need to provide a physical address of your corporation. if necessary. please make sure you provide the most essential address information (i. the online EIN application allows only two special punctuation characters: hyphen (-) and ampersand (&). LC. Provide the corporation's business location. apartment numbers. you need to provide the name of the corporation. The name you provide as the legal name of your corporation should match the articles of organization or articles of incorporation. if any. you will be taken to a page to provide that address. and the corporation start date. or Inc. When prompted by the online EIN application. This address must be a U. The online EIN application automatically fills in the county and state based on the physical address previously entered. you should verify that both of these bits of information are correct. PLLC. However. This is the date on which the entity began doing business or will begin doing business. If your address does not fit in 35 characters. The final question on this page is whether you have an address different from the physical location where you wish to have your mail sent. address and may not be a PO box. Do not use any punctuation except for a hyphen or a back slash. identify the state where the articles of organization or articles of incorporation were filed. the trade name (if any). the state where the articles of organization or formation are filed. suite numbers. The IRS will then validate the address you’ve provided with the United States Postal Service’s database and offer you an opportunity to make any changes to the address.e.S. again when prompted. you will need to provide the corporation's start date. Again. Corp.5. the county and state where the corporation is located. 6. Note: IRS systems only allow 35 characters on the street address line. the name may not contain an ending such as LLC. 2008 by Fast Easy Incorporation Kits web site .. When prompted. Provide legal and trade name information about your corporation. Finally. You can also provide a trade name. If you use a trade name. This is typically the same state as the corporation's physical address. however. A trade name or "doing business as" name is another name under which the business or individual operates.
State How You Would Like to Receive Your EIN Confirmation Letter. that you will need to have the Adobe Reader program installed on your computer. Indicate whether the corporation is subject to special federal excise taxes. 7. This may take up to four weeks. 2008 by Fast Easy Incorporation Kits web site . Note. choose a category that best describes your business. If you choose to receive the letter by mail. Copyright © 2007. click on "Other" and then click the “Continue” button.Click the “Continue” button. If you choose “Other” you will be taken to a second page of options. address and start date information. quarterly federal excise tax returns. For most people. Read the questions and answer them. Click the “Continue” button. tobacco and firearms. the online EIN application asks a series of questions about vehicles. Click the “Continue” button. If none of the categories fit. If none of these options fit. you can click on that category for a further explanation. After you provide the corporation name. gambling. though. State what your corporation does. 9. you will be able to view the letter immediately and it will not be mailed to you. If you aren’t sure what a category includes.adobe. and alcohol.com/products/acrobat/readstep2. Then click the “Continue” button.html. This program can be downloaded for free from: http://www. 8. the answer will be “No” to all four questions. click on the “Other” button on this page and then type in what your corporation will do. When prompted. the IRS will send it to the mailing address you provided. If you choose to receive it online. You can receive your EIN confirmation letter online or by mail.
Note: The unique prefixes 20 and 26 identify the EIN as a number issued via the Internet.irs.m.gov/pub/irs-pdf/fss4.10:00 p. If you forget your EIN number. start a new application. the easiest way to get an EIN number is through the interview-style.irs. Applying for a New EIN using the Paper SS-4 Form As mentioned. At the time I'm writing this document. call (800) 829-4933 and select EIN from the list of options in order to speak with an IRS employee. This process can take up to two minutes.pdf Applying for a New EIN by Telephone You can also obtain an EIN immediately by calling (800) 829-4933. however. The hours of operation are 7:00 a.gov/pub/irs-pdf/iss4. For example.m. Print the summary page and check the information for errors. you really should retrieve a copy of the SS-4 form and form instructions from the www. "Application for an Employer Identification Number. click the “Submit” button to receive your EIN. you can download a paper copy of the Form SS-4. complete it. Before calling for an EIN. Tell the assistor you received an EIN from the Internet but can't remember it. the IRS also provides other procedures for obtaining an EIN. Monday through Friday." from www. However.gov web site and fill out the form as best you can before calling the number just given. If any of the information is incorrect. local time. The last page of the online EIN application summarizes your information.irs. the web address for the SS-4 form is: http://www. Verify Your Information. . Then. Copyright © 2007.pdf The web address for the SS-4 form instructions is: http://www. online EIN application described in the preceding paragraphs.10.irs. and then mail or fax the completed SS-4 to the appropriate address or fax number.gov. 2008 by Fast Easy Incorporation Kits web site . after you determine the information is correct.
you file Form 2553 with the Internal Revenue Service within 75 days from the start of the year. citizens or permanent residents. Download the election forms. and certain trusts and charities. (2) the corporation must have only one “class” of stock ownership treating all stockholders in the same way when it comes to distributions of profits and capital.Electing S Corporation Treatment for a Corporation A corporation may elect to be treated as a Subchapter S corporation. S corporations offer their owners and shareholder-employees some wonderful tax planning opportunities. the precise web address for the 2553 form is: 3 The IRS may allow you to make a late S election. You will want to contact them or a knowledgeable local tax practitioner for current information about any “late Subchapter S election procedures” procedure. Washington and Wisconsin) must consent to the S election. If you want an S election to be effective as of January 1. At the time I'm writing this. you need to file the election by March 15. including pass-through of net operating losses. In a nutshell. Get the IRS 2553 form from the www. estates of U. citizens or permanent residents. called a C corporation. 4 You can get basic tax information on S corporations by visiting www.3 Caution: I want to caution you one last time about making the S election: Before you elect.fasteasyincorporationkits.S.SCorporationsExplained. In order to become an S corporation.com/taxationofcorporations. in other words. a corporation must meet certain eligibility requirements. California. Texas. Louisiana.4 However. also known as an S corporation. many tax traps exist for the unwary and the careless. 2008 by Fast Easy Incorporation Kits web site . S corporations often save the small business owner significant amounts of federal corporation income tax and payroll taxes. no federal corporate income tax. If you want an S election to be effective as of June 1 (because that’s the incorporation date and the point at which the corporation’s first year states).htm. make sure you understand how S corporation taxation differs from sole proprietorship or partnership taxation by carefully reviewing the information provided earlier in this ebook and at my do-it-yourself incorporation web sites. To complete and file the IRS Form 2553.S. (3) the corporation generally can’t have more than 100 shareholders (except that families of shareholders count as one shareholder for purposes of this test).gov web site. Enough said. Copyright © 2007. follow these steps: 1. and (sometimes) substantial payroll tax savings. Idaho. (1) all shareholders (and shareholder spouses residing in community property states like Arizona. To make the election to be treated as an S corporation. you need to file the election by August 15. and (4) shareholders must generally be either U.irs.com and from the http://www. Nevada. New Mexico. As compared to a regular corporation.
irs. 2008 by Fast Easy Incorporation Kits web site .pdf Copyright © 2007.http://www. to also grab an up-to-date copy of the form instructions.irs.gov/pub/irs-pdf/i2553.pdf It's also not a bad idea.gov/pub/irs-pdf/f2553. if you're going to grab an up-to-date copy of the form. The precise web address for the 2553 instructions at the time I'm writing this is: http://www.
Copyright © 2007. 2008 by Fast Easy Incorporation Kits web site .Figure 2: Page 1 of an example completed 2553 Form.
Specify that the S corporation’s tax year will end on December 31. make an S election effective as of the start of the year (typically January 1). you shouldn’t make the S election yourself. When corporations become S corporations after being a C corporation. the new S corporation may be subject to special taxes and also be subject to several accounting rules too complicated for a doit-yourselfer. Tip: You can elect Subchapter S status for a corporation that’s previously operated as a regular C corporation. 3. however. Note: If you think you want a non-calendar fiscal year end. and the employer identification number. however. you should confer with a local tax practitioner—an attorney or accountant who specializes in tax law—and go over the specifics of your situation. Enter the effective date of your S election into Box E. 2008 by Fast Easy Incorporation Kits web site . People use this space when they miss the deadline and then need to file the 2553 form late with the actual S corporation 1120S return. or November. You should confer with a knowledgeable tax practitioner. that the effective date can not be more than 75 days before the date on which you’re making the election (typically March 15). Enter your name and telephone information into Box H.” you enter the name of the corporation. You can also. Note: You want to mark one of the applicable checkboxes in Box D if after receiving its EIN the corporation changed either its name or address. in the block labeled “Type Or Print. Accordingly. S corporation fiscal years can end on December 31. Provide the corporation’s name. almost certainly want to mark the Calendar Year option in box F. city and state. However. or on the last day of September. however. This tells the IRS who to call if they have questions about the S election. 4. the effective date of the S election is the incorporation date. the street address. Instead. you probably.2. At the very top of the form (see Figure 2). the IRS provides space for you to explain why you're filing a late 2553 election. You also need to enter the date of incorporation (which should be the election date if you’re elected S status from the very beginning) and the state in which the corporation was formed. October or November—only complicates your tax accounting and produces no real benefit for you. Note: In the area beneath box H. Copyright © 2007. Having a non-calendar fiscal year—an accounting year that ends in September. Typically. and EIN information. address. October. 5. you should not do this using a do-it-yourself approach. You shouldn't need to use this space if you're filing the election on time. Note.
You need to enter each shareholder’s social security number into column M. You need to provide each shareholder name and address in column J. On page 2 of the 2553 form (see Figure 3). Texas. no stock is owned so a “NA” for “not applicable” can go into the Number Of Shares column and you can just put something like “spouse” into the Date column. Nevada.) As mentioned earlier in this ebook. You must use column L to identify the number of shares that each shareholder holds. Idaho. shareholder spouse. Note: You won't need to worry about the third page of the 2553 form (see Figure 4). L. 6. Louisiana. Name and get signatures from each shareholder and. you probably want to pay a lawyer. New Mexico. If you've already goofed up the S election deadline.My suggestion. enter the month and day that each shareholder’s tax year years. M. you should include the blank third page in the envelope you mail or in the fax you send the IRS simply to show them the page is blank. You’ll also need to sign and date the S election 2553 Form at the bottom of page 1 where the form asks for the signature and title of an officer. Note that in the case of non-shareholder spouse. and N to name each shareholder in the new S corporation. if needed. If owners don’t hold shares but only percentage interests. use columns J. is that you not try to file a late election yourself. you can enter those percentages into column L. Washington. California. Finally. if any of your shareholders resides in a community property state (Arizona. 7. the spouse of a shareholder must also sign the S election even if the spouse doesn’t own shares or an interest in the S corporation. However. Sign the S election Form. and you want to have someone who understands the most current special procedures do the election. Copyright © 2007. (This should be December 31 in the case of most individuals. certified public accountant or enrolled agent who specializes in S corporations to fix your election. Wisconsin and sometimes Alaska and Puerto Rico). by the way. K. You need to have each shareholder sign and date the S election in column K. The IRS typically has special procedures for making these late elections. 2008 by Fast Easy Incorporation Kits web site .
Figure 3: Page 2 of an example completed 2553 Form. Copyright © 2007. 2008 by Fast Easy Incorporation Kits web site .
2008 by Fast Easy Incorporation Kits web site .Figure 4: Page 3 of an example completed 2553 Form. Copyright © 2007.
Louisiana. the IRS is so forgiving about late S elections that it's probably just as easy to fax the completed 2553 form. Vermont. Pennsylvania. Ohio. Mississippi. Arizona. If you have trouble getting the State of California to process your articles of incorporation or getting the Internal Revenue Service to process your SS-4 or 2553 Forms. Hawaii. I made this routine suggestion because if you mail the 2553 Form using certified mail with a delivery receipt and the IRS service center loses the 2553 Form. I want to share a handful of quick comments: 1. Fax or Mail the 2553 Form to make the federal S election. Maryland. Oregon. Georgia. Especially with the IRS. Idaho. Montana. West Virginia. Virginia. New Hampshire. office or agency address is located in state of: Connecticut. Nebraska. Kentucky. you can see which mailing address or fax number you can use for your state using the table below. Rhode Island. Colorado. California. North Carolina. Delaware. I used to suggest that people mail the 2553 form using certified mail with a delivery receipt. Maine. Texas. Washington. attempt to immediately resolve any problems by telephoning the Secretary of State’s office or the local IRS office. Michigan. Alaska. If your principal business. 2008 by Fast Easy Incorporation Kits web site . North Dakota. Wisconsin Alabama. New Mexico. Utah. but nowadays. Tennessee. Massachusetts. Kansas. Nevada. South Dakota.8. Indiana. you can often use a copy of the 2553 Form and your certified mail delivery receipt to prove a timely election—even if the March 15th deadline has past. Oklahoma. South Carolina. Florida. Wyoming Then use the following mailing address or fax number to submit 2553 Department of Treasury Internal Revenue Service Center Cincinnati. Illinois. New Jersey. Arkansas. Missouri. District of Columbia. New York. Iowa. In any case. OH 45999 Fax: (859) 669-5748 Department of Treasury Internal Revenue Service Center Ogden. Certified mail with a delivery receipt isn't a bad idea. Minnesota. cross your fingers and then make a late election via mail if there's a deadline problem. if you act immediately you can often still fix a problem before the election deadlines expire. UT 84201 Fax: (801)-620-7116 Some Closing Caveats and Comments Before I end this short booklet. Copyright © 2007.
My strong suggestion to my clients is that they collect independent salary data to support what their S corporation pays shareholderemployees in wages. enlist the services of a local professional. For example.S. or “fiscal.” year that ends on the last day of any month of the year. such as from the U. Montana. 3. you should probably assume that the IRS will challenge an unreasonably low or high salary. give up on the “do-it-yourself” approach and. 4. For corporations that use a calendar year ending December 31. But if you’re having trouble. The corporate tax returns (the 1120 tax return for a regular corporation and the 1120-S tax return for an S corporation) are too complicated to do yourself—even if you buy tax preparation software.2. but you also shouldn’t convert a C corporation that's already been actively operating to an S corporation without first consulting a tax practitioner because of some special tax considerations of going from C status to S status. 6. Note that with good salary data. C corporations. a regular C corporation can often have an accounting. the “75 day clock” means that the corporate return is due on March 15—not April 15 (which is when individual tax returns and partnership tax returns are due). you often can support a salary that allows you to save on taxes. Something you should know now. If you can’t resolve the problems yourself. Corporation tax returns for both C and S corporations are due 75 days after the end of the tax year. I mentioned this before. Be aware that if your new corporation operates in states other than California you’ll have corporate registration and business licensing requirements to meet in those other states. It’s truly foolish to save yourself $500 of attorneys’ fees but end up paying an extra $5. but will want to stick with a calendar year because a non-calendar year only complicates your tax accounting and means you’re paying your tax accountant more money for your tax return. say. can be several thousand dollars a year. The “cost” of fouling up an S election. Don’t put assets that may appreciate (such as real estate) into a corporation without consulting a knowledgeable tax attorney or a CPA. 2008 by Fast Easy Incorporation Kits web site . before you finish setting up your corporation: In general. 5. a smart person who’s careful can work through the paperwork themselves. you will need a certified public accountant or enrolled agent to prepare a corporate tax return for your new corporation. S corporations may be able to use a non-calendar year. don’t waste time trying to fix a problem you don’t understand. for example. however. Copyright © 2007. Be aware that the IRS can challenge an unreasonably low salary paid to an S corporation shareholder-employee as well as an unreasonably high salary paid to a C corporation shareholder-employer. instead. Government’s Bureau of Labor Statistics. Most of the time. may often use a non-calendar year for their accounting. you’ll also need to register your California corporation with the Montana Secretary of State’s office and get the appropriate business licenses from Montana state. county and city government agencies. In other words. if your corporation begins doing business in. In fact. 7.000 in payroll taxes.
Appendix A Sample Corporate By-laws Copyright © 2007. 2008 by Fast Easy Incorporation Kits web site .
or at such other time and date as will be determined from time to time by the Board and stated in the notice of the meeting. The Company may. Shareholder Meetings.3. for any purpose or purposes. on any weekday which is not a holiday and which is not more than 90 days after the end of the fiscal year of the Company. present in person or represented by proxy. Special meetings of the shareholders. as the Board of Directors of the Company (the “Board”) may from time to time determine or as the business and affairs of the Company may require. however. 2. have such other offices and places of business.4. or (b) shareholders owning capital stock of the Company representing not less than one tenth of the votes of all capital stock of the Company entitled to vote thereat. until a quorum will be present or represented. Such request of the Board or shareholders will state the purpose or purposes of the proposed meeting. Written notice of each shareholders meeting stating the place.Bylaws of ______________________________________________ Formed under the laws of the state of _______________________ (the “Company”) 1. Quorum.2. The presence at a shareholders meeting of the holders. At such reconvened meeting at which a quorum Copyright © 2007. without notice other than announcement at the meeting. If said notice is for a shareholders meeting other than an annual meeting. 2008 by Fast Easy Incorporation Kits web site . the shareholders entitled to vote thereat.m. both within and without the state in which it is incorporated. Annual meetings of shareholders will be held at 10:00 a. unless otherwise prescribed by the articles of incorporation or law. Offices. Notices. Special Meetings. of capital stock of the Company representing a majority of the votes of all capital stock of the Company entitled to vote thereat will constitute a quorum at such meeting for the transaction of business except as otherwise provided by the articles of incorporation or law. If. such quorum will not be present or represented at any meeting of the shareholders. will have power to adjourn the meeting from time to time. 2. date and time of the meeting will be given to each shareholder entitled to vote thereat not less than ten nor more than 60 days before the date of the meeting. at which the shareholders will elect by a plurality vote of their shares the directors of the Company and transact such other business as may properly be brought before the meeting.1. it will in addition state the purpose or purposes for which said meeting is called. 2. present in person or represented by proxy. 2. 2. and the business transacted at such meeting will be limited to the matters so stated in said notice and any matters reasonably related thereto. Annual Meetings. may be called by the president and will be called by the president or secretary at the request in writing of (a) a majority of the Board. in addition to its registered office in the state in which it is incorporated.
of capital stock of the Company representing a majority of the votes of all capital stock of the Company entitled to vote thereat will decide any question brought before such meeting. The number of directors constituting the Board will never be less than one and will be determined by resolution of the Board. by express provision of the articles of incorporation or law. 2. 3.will be present or represented.5. If any such adjournment is for more than 30 days. 3.5. Consents in Lieu of Meeting.3. at least ten days before every meeting of shareholders. the vote of the holders. Directors. Such list will be open to the examination of any shareholder. a complete list of the shareholders entitled to vote thereat arranged in alphabetical order and showing the address of and the number of shares registered in the name of each shareholder. Voting Lists.1. if a consent in writing. 2. or if after the adjournment a new record date is fixed for the reconvened meeting. each shareholder will be entitled to one vote in person or by proxy at every shareholders meeting for each share of capital stock held by such shareholder. and may be inspected by any shareholder who is present. at any meeting of shareholders may be taken without a meeting. Votes Per Share. without prior notice and without a vote. When a quorum is present at any meeting. Directors need not be shareholders or residents of the state in which the Company is incorporated. No proxy will be voted on after eleven months from its date. or which may be taken. will be signed by all of the holders of outstanding stock entitled to vote thereon.4. Voting of Shares. 2. 2. unless the proxy provides for a longer period.1. 3.3. Number. The list will also be produced and kept at the time and place of the meeting during the whole time thereof.2. Plurality. 2. a different vote is required. setting forth the action so taken. Copyright © 2007. during ordinary business hours for a period of at least ten days prior to the meeting. any business may be transacted which might have been transacted at the meeting as originally notified. unless the question is one upon which. for any purpose germane to the meeting. present in person or represented by proxy. in which case such express provision will govern and control the decision of such question. The officer who has charge of the stock ledger of the Company will prepare. 2.2. at the registered office of the Company. Election. which may exercise all such power of the Company and do all such lawful acts and things as are not by these bylaws. The business of the Company will be managed by or under the direction of the Board. 2008 by Fast Easy Incorporation Kits web site .5. All directors will be elected by the shareholders at each annual shareholders meeting.5.5. Proxies. Any action required to be taken. Purpose. Unless otherwise provided in the articles of incorporation.5.5. a new notice of said meeting will be given to each shareholder entitled to vote at such meeting. the articles of incorporation or law directed or required to be exercised or done by the shareholders. 3.
and the writing or writings are filed with the minutes of proceedings of the Board or committee. any director or the entire Board may be removed. provided a quorum is present. periodic meetings of the Board may be held without notice at such times as will from time to time be determined by resolution of the Board. Vacancies in the Board may be filled by a majority vote of the remaining directors. if any. Special Meetings. 4. No more than two (b) newly-created directorships may be filled by the Board between any two (b) successive annual shareholders meetings. 4. if all members of the Board or committee. consent thereto in writing. Any director so elected by the Board will have a term terminating with the next election of one or more directors by the shareholders. Plurality. Vacancies.4.5. Unless otherwise restricted by these bylaws or the articles of incorporation.5. by a majority vote of the shares entitled to vote at an election of directors. except as may be otherwise expressly provided by the articles of incorporation or law. Regularly scheduled. Annual Meeting. If a quorum will not be present at any meeting. 4. Compensation. Consent in Lieu of Meeting. the directors present thereat may adjourn the meeting from time to time. 4. either personally or by mail or telegram. 4. No such payment will preclude any director from serving the Company in any other capacity and receiving compensation therefore. as the case may be. Removal. The directors may be reimbursed their expenses. as the case may be. Quorum. Unless otherwise restricted by these bylaws or the articles of incorporation.1. Unless otherwise restricted by these bylaws or the articles of incorporation. though less than a quorum. of attendance at each meeting of the Board and may be paid either a fixed sum for attendance at each meeting of the Board or a stated salary as director. until a quorum is present. 4. Members of committees of the Board may be allowed like compensation for attending committee meetings. Special Meetings of the Board may be called by the president on one day’s notice to each director. 2008 by Fast Easy Incorporation Kits web site . Meetings of the Board. Regular Meetings.126.96.36.199. and the act of a majority of the directors present at any meeting at which there is a quorum will be the act of the Board. with or without cause. Copyright © 2007. without notice other than announcement at the meeting. The Board will meet as soon as practicable after the adjournment of each annual shareholders meeting.3. the Board will have the authority to fix the compensation of directors. A majority of the directors will constitute a quorum for the transaction of business at any meeting of the Board. A director elected to fill a vacancy will be elected for the unexpired term of his predecessor. 3. The president or secretary will call a special meeting of the Board on the written request of two (b) directors or the sole director. any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting. 3. No notice to the directors will be necessary legally to convene this meeting.
the articles of incorporation and law. The president will be the chief executive officer of the Company.3. 2008 by Fast Easy Incorporation Kits web site . 6. Committees of Directors. 6. Establishment. 5. will have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company. In the absence of the president or in the event of his inability or refusal to act. the vice president (or in the event there be more than one vice president. 6. Each committee will keep regular minutes of its meetings and report the same to the Board when required.1. will have general and active management authority over the business of the Company and will see that all orders and resolutions of the Board are carried into effect. amend or repeal any resolution of the Board which provides that it will not be so amendable or repealable.1. He will advise and counsel the president and other officers and will exercise such powers and perform such duties as will be assigned to or required of him from time to time by the Board. Available Powers. each committee to consist of one or more of the directors.1. 5. adopt a plan of merger or consolidation. President. fix the compensation of any member of such committee. 5. declare a dividend or authorize the issuance of stock. Unavailable Powers.3. then in the order of their election) will perform the duties of the president. No committee of the Board will have the power or authority to amend the articles of incorporation. Chairman of the Board. The chairman of the Board will preside at all meetings of the shareholders and the Board. these bylaws or the articles of incorporation expressly so provide. In the absence of the chairman of the Board or in the event of his inability or refusal to act. cause the dissolution of the Company or a revocation of such a dissolution.2. deeds of trust and other contracts requiring a seal under the seal of the Company. and may authorize the seal of the Company to be affixed to all papers which may require it. recommend to the shareholders the sale. name or dissolve one or more committees. The Board will elect a president and a secretary (collectively. amend the bylaws of the Company.5. the “Required Officers”) having the respective duties enumerated below and may elect such other officers having the titles and duties set forth below which are not reserved for the Required Officers or such other titles and duties as the Board may by resolution from time to time establish: 6. The Board may by resolution establish. fill a vacancy in the Board or any committee thereof. Officers. Any such committee. to the extent provided in the resolution of the Board establishing such committee and as limited by these bylaws.1. the president will preside at all meetings of the shareholders and the Board.1. or if there be no such determination. except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof will be expressly delegated by the Board to some other officer or agent of the Company. lease or exchange of all or substantially all of the Company’s property and assets other than in the ordinary course of business. Copyright © 2007. The president will execute bonds.2. unless the resolution establishing such committee. or. Elected Officers. the vice presidents in the order determined by the Board. 6.1. Vice Presidents.
vouchers. if any. Such divisional officers will be appointed by. The Board may give general authority to any other officer to affix the seal of the Company and to attest the affixing thereof by his signature. The treasurer will have custody of the corporate funds and securities. and when so affixed.1. if there be more than one. 6.1. assistant secretaries. perform the duties and exercise the powers of the secretary and will perform such other duties and have such other powers as the Board or the president may from time to time prescribe. taking proper vouchers for such disbursements.and when so acting. it may be attested by his signature or by the signature of such assistant secretary.7. The vice presidents will perform such other duties and have such other powers as the Board or the president may from time to time prescribe. will keep full and accurate accounts of receipts and disbursements in books belonging to the Company and will deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositaries as may be designated by the Board. 6. he will give the Company a bond which may be renewed with such frequency and will be in such sum and with such surety or sureties as will be satisfactory to the Board for the faithful performance of the duties of his office and for the restoration to the Company in the case of his death. Divisional Officers. the assistant secretaries in the order determined by the Board (or if there be no such determination. report to and serve at the pleasure of the Board and such other officers that the Board Copyright © 2007.4. He will give. Assistant Treasurers. assistant treasurers and other assistant officers. Any number of such offices may be held by the same person. secretary. then in the order of their election or appointment) will. then in the order of their election or appointment) will. papers. an account of all his transactions as treasurer and of the financial condition of the Company. The assistant secretary or.8.6. If required by the Board. Treasurer. treasurer or controller and one or more vice presidents. He will disburse the funds of the Company as may be ordered by the Board.1. notice of all meetings of the shareholders and special meetings of the Board and will perform such other duties as may be prescribed by the Board or the president. may have a president. in the absence of the treasurer or in the event of his inability or refusal to act. if there be more than one. retirement or removal from office of all books.5. Each division of the Company. 6.1. The assistant treasurer or. the Board and (as required) committees of the Board and will record all the proceedings of such meetings in books to be kept for that purpose. Assistant Secretaries. the assistant treasurers in the order determined by the Board (or if there be no such determination. The secretary will attend all meetings of the shareholders. or when the Board so requires. 6.1. in the absence of the secretary or in the event of his inability or refusal to act. at its regular meetings. 6. He will have custody of the corporate seal of the Company and he will have authority to affix the same to any instrument requiring it. perform the duties and exercise the powers of the treasurer and will perform such other duties and have such other powers as the Board or the president may from time to time prescribe. will have all the powers of and be subject to all the restrictions upon the president. or cause to be given. and will render to the president or to the Board. Secretary. money and other property of whatever kind in his possession or under his control belonging to the Company. resignation. 2008 by Fast Easy Incorporation Kits web site .
participating.2. possessing authority over or responsibility for any functions of the Board will be elected officers. Election. and (b) the Company will furnish a copy of such statement without charge to each shareholder upon request therefore. The setting of salaries of appointed officers and the filling of vacancies in appointed offices may be delegated by the Board to the same extent as permitted by these bylaws for the initial filling of such offices. The salaries of elected officers will be set by the Board.1 for elected officers. 2008 by Fast Easy Incorporation Kits web site . as it will from time to time deem necessary. where so authorized.may place in authority over them. retirement. unless these bylaws or the articles of incorporation otherwise provide. will be entitled to have a certificate. provided that. unless and to the extent the Board by resolution provides that any or all classes or series of a class of stock will be uncertificated. resignation or removal from office. 6. Shareholder and Director Officeholders. routinely possessing authority over or responsibility for any functions of the Board must be directors. such as the chairman of the Board. disqualification.1. Appointed Officers. provided that the Required Officers and any other officer. 6. 7. be set forth in full on the face or back of such certificate which the Company will issue to represent such class or series of stock.3.5.4. and the titles and duties of such appointed officers may be as described in Section 6. Entitlement to Certificates. Multiple Classes of Stock. The Board may also appoint or delegate the power to appoint such other officers. to the extent allowed by law. Any number of offices may be held by the same person. unless the Board will by resolution provide that such class or series of stock will be uncertificated. certifying the number of shares owned by him. 6. such as the chairman of the Board. All elected officers will be elected at each annual meeting of the Board and will serve until their successors are duly elected and qualified or until their earlier death. 7. Vacancies.2. Multiple. Copyright © 2007. The officers of each division will have such authority with respect to the business and affairs of that division as may be granted from time to time by the Board and in the regular course of business of such division may sign contracts and other documents in the name of the division. a statement of the powers. Salaries. optional or other special rights of each class of stock or series thereof and the qualifications. Officers. the face or back of such certificate may state that (a) such a statement is set forth in the articles of incorporation as filed with the secretary of state of the state in which the Company is incorporated. Every holder of the capital stock of the Company. designations. limitations or restrictions of such preferences and/or rights will. in lieu of such statement. prepared in accordance with applicable law. Share Certificates. preferences and relative. If the Company will be authorized to issue more than one class of capital stock or more than one series of any class. 7. Officers need not be shareholders or residents of the state in which the Company is incorporated. assistant officers and agents and may also remove such officers. assistant officers and agents or delegate the power to do the same. 6. The Board will also fill any vacancy in an elected office.
require the owner of such lost.4. cancel the old certificate and record the transaction upon its books. stolen or destroyed certificate or certificates. 7. The Company will be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends. to express consent to corporate action in writing without a meeting. Signatures. at the Board’s election. and (b) the treasurer. the secretary or an assistant secretary of the Company.6. stolen or destroyed upon the making of an affidavit of that fact by the owner of the allegedly lost. or his legal representative. the certificate may be issued by the Company with the same effect as if such officer held such office on the date of issue. an assistant treasurer. the Board may fix. 7. A record date validly fixed for any meeting of shareholders will be valid for any adjournment of said meeting and will. 2008 by Fast Easy Incorporation Kits web site . to receive payment of any dividend or other distribution or allotment of any rights.5. to advertise the same in such manner as it will require and/or to give the Company a bond in such sum as it may direct and with such surety or sureties as are acceptable to it as indemnity against any claim that may be made against the Company with respect to the allegedly lost. Copyright © 2007. be valid for any reconvenings and readjournments of said meeting made no later than 90 days after said record date.7. stolen or destroyed certificate or certificates. the signatures of the officers of the Company may be facsimiles. In order that the Company may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof. Registered Shareholders. the Board may. if any. in advance. the Company will be obligated to issue a new certificate to the person entitled thereto.3. in its discretion and as a condition precedent to the issuance thereof. which will not be more than 60 nor less than ten days prior to any such action. Lost Certificates. The Board may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Company alleged to have been lost. When authorizing such issue of a new certificate or certificates. the president or any vice president. assignation or authority to transfer said shares and of the payment of all taxes applicable to the transfer of said shares. Upon surrender to the Company or to its transfer agent. except as otherwise required by law. Transfer of Stock. Where a certificate is countersigned by either (a) a transfer agent other than the Company or any employee thereof. 7. to exercise any rights in respect of any change.7. whether or not it will have express or other notice thereof. stolen or destroyed certificate or certificates. Each certificate representing capital stock of the Company will be signed by or in the name of the Company by (a) the chairman of the Board. vote and be held liable for calls and assessments and will not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any person other than such registered owner. or the legal representative thereof. or (b) a registrar other than the Company or any employee thereof. 7. of a certificate for shares duly endorsed or accompanied by proper evidence of succession. conversion or exchange of stock or to effect any other lawful action. a record date. In case any officer who has signed or whose facsimile signature has been placed upon a certificate will have ceased to hold such office before such certificate is issued. Fixing Record Date.
any committee thereof or the shareholders may hold a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can effectively communicate with each other. Whenever. under these bylaws. the articles of incorporation or these bylaws. Dividends on the capital stock of the Company. 8. 8. and at any special meeting of shareholders when called for by vote of the shareholders. Means of Giving Notice.1. notice is required to be given to any person. return receipt requested. Place of Meetings. as will be designated from time to time by the Board and stated in the notices thereof. Whenever any notice is required to be given under law. All shareholders and directors meetings will be held at such place or places. 8. (2) on the earlier of (i) the fourth day after deposit. if given pursuant to clause (d) of the previous sentence. if given pursuant to clauses (b) or (c) of the previous sentence. 8.4.7. for equalizing dividends. said meetings will be held at the registered office of the Company. paid in cash. if given pursuant to clause (a) of the previous sentence. Before payment of any dividend. Dividends. or (3) when received. may be declared by the Board at any meeting thereof. prepaid. Miscellaneous. The Board will present at each annual meeting of shareholders. 8. and the Board may modify or abolish any such reserve in the manner in which it was created. prepaid. Unless otherwise restricted by these bylaws.2. If no such place is so designated. members of the Board. 8. the articles of incorporation or law applicable to the Company. cable. determines proper as a reserve or reserves to meet contingencies. the articles of incorporation or law. Copyright © 2007. Reports to Shareholders. Any such notice will be given at the address of the receiving party of which the sending party has last received actual or constructive notice. signed before or after the date of such waiver by the person or persons entitled to said notice. within or without the state in which the Company is incorporated. Reserves. a written waiver of such notice.3. return receipt requested. Waiver of Notice. there may be set aside out of any funds of the Company available for dividends such sum or sums as the Board from time to time.5. but such notice may be given by (a) personal delivery. the articles of incorporation or law. or (d) facsimile. 2008 by Fast Easy Incorporation Kits web site . or (ii) the time verification is made of delivery.6.8. will be deemed equivalent to such required notice. 8. Attendance Via Communications Equipment. (b) deposit in the United States mail. for repairing or maintaining any property of the Company or for such other purposes as the Board will determine to be in the best interest of the Company. Any such notice will be deemed to be received (1) when delivered. it will not be construed to mean personal notice. (c) deposit with a recognized courier company. and such participation in a meeting so held will constitute presence in person at the meeting. property or shares of capital stock and as may be limited by these bylaws. telex or telegram transmission. in its absolute discretion. a full and clear statement of the business and condition of the Company.
Checks. 8. repealed or replaced by the Board and by the shareholders.9.11. 2008 by Fast Easy Incorporation Kits web site .8. The fiscal year of the Company will be fixed by resolution of the Board. Amendments. altered. All checks or demands for money and notes of the Company will be signed by such officer or officers or such other persons as the Board may from time to time designate. 8. at any annual shareholders meeting or annual or regular meeting of the Board. The seal of the Company will be in such form as may from time to time be adopted by the Board. These bylaws may be adopted. The seal may be used by causing it or a facsimile thereof to be impressed.8. 8. or at any special meeting of the shareholders or of the Board if notice of such adoption. END Copyright © 2007. Fiscal Year. alteration. repeal or replacement is contained in the notice of such special meeting. affixed or otherwise reproduced. amended.10. unless and to the extent the power of either is limited by the articles of incorporation. amendment. Seal.
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