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Do-It-Yourself Incorporation Kit: Arkansas 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 © 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 an Arkansas corporation. Specifically, I provide step-bystep instructions for completing several legal and tax documents related to forming a Arkansas corporation, including filing the articles of incorporation with the Arkansas 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 Arkansas 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 Arkansas Corporation
Corporations deliver two huge benefits to Arkansas 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 me.” 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 you from that sort of tort liability. In other words, the customer can probably look not
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.
Copyright © 2007, 2008 by Fast Easy Incorporation Kits web site
for example. And this consultation doesn’t need to be particularly expensive. 2008 by Fast Easy Incorporation Kits web site . business owners may intentionally or unintentionally do things that remove or weaken the legal liability protection that a corporation provides. regularly get an attorney involved in your business or investment planning. If you’re extremely concerned about the asset protection features of setting up and operating a corporation. A C corporation (but not an S corporation which I discuss next) can typically provide tax-free fringe benefits to all of its employees. Copyright © 2007. Finally. And this is true even if the only employee is a shareholder. which makes things murkier. reimbursement of medical expenses. But—and here’s the neat thing—the deductions aren’t taxed to employees. one of your employees or subcontractors. “I guarantee that my corporation will satisfy all of its obligations to you and if it doesn’t. drops a hammer on the customer’s head? The corporation may offer you some protection in this case. The first potential tax saving associated with incorporating your business applies to what the tax laws call a C corporation. The customer might reasonably argue that you should have done a better job managing the employee or subcontractor. And here’s another example. As a general rule. small business corporations provide two tax benefits to their owners. 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. But you may still be personally responsible as the manager of the person dropping the hammer. 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. 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 deductions by tax laws. An attorney knowledgeable in Arkansas business law can help you increase the liability protection that you gain from using as corporation for your business or investing. 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. the corporation can provide benefits such as medical insurance.only to your corporation for payment of damages related to the dropped hammer but also to you personally. and so on. Here’s what all this means. in effect. What happens if someone working for you. a modest amount of life insurance. In other words. A business owner might give a personal guarantee to a bank or vendor that says.” Or a business owner might. I will personally pick up the tab. employee housing (in some cases).
000 of profit. A corporation also affords its owners a second potential tax saving opportunity. the corporation probably sets the shareholder-employee’s wages Copyright © 2007. Subchapter S status. In all three of these cases. 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.000 in tax on the first $100.000 or $30. or a single shareholder in a regular corporation (called a C corporation by tax laws) makes $200. Note: In the case of a sole proprietorship or partners in a partnership. (Those income taxes probably total another $30.000 or $40. Yet those benefits. If the single shareholder-employee extracts all of the $200.000 in tax on the first $100. This proprietor or partner will pay roughly $15.000 of profit and then roughly 3% on any profit above $100. 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.000 of business profit. In this case. and I’m being a little rough here. In addition to income tax. while tax deductions for the corporation. In the case of a shareholder-employee in a corporation. Caution: If you want to explore or exploit the tax-free fringe benefits angle in more detail.000 of business profit and $3. a partner in a partnership. though. In a nutshell. And this would mean that the annual tax savings would very likely run between $5.Tax-free fringe benefits. the business owner pays roughly $18. the employment taxes are called self-employment taxes.000 a year in tax-free fringe benefits to that employee.000 and $10.000 of business profit.000 on the second $100.000.) Things work differently if the corporation elects to be treated as a Subchapter S. Again. the employment taxes are called Social Security and Medicare taxes. would not be taxable to the employee. To understand this benefit. then. and he or she will pay roughly $3.000.000 in a year. suppose a sole proprietor. 2008 by Fast Easy Incorporation Kits web site . 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 on the second $100. allow a small corporation’s owners to enjoy some of their business profits tax free.000 of profit.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. the corporation might be providing $20. corporation. note that these employment taxes are in addition to the income taxes he or she pays on the $200.000 each year. money that a business owner makes in an active trade or business is not subject just to income taxes. To show you how the employment taxes work.000 of employment taxes. or S.
As compared to the case where the same business makes $200. making an owner a corporate employee results in a new. $20. accounting and insurance costs. 2008 by Fast Easy Incorporation Kits web site . an S corporation saves the shareholder-employee roughly $9.000 annually.000 a year but is operated as a sole proprietorship. Perhaps this means wages equal to $60. the employment tax equals 15% of only the $60. For example. 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. extra payroll tax (the Federal Unemployment Tax). For example. And this tax return may cost anywhere from a few hundred dollars to a few thousand dollars annually.000 an employer pays individual employees in wages. This tax equals as much as 6. there are costs and headaches associated with incorporating. 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. A corporation may involve several hundred or even a few thousand dollars of startup expense. 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. Increased Administrative Complexity… As a general rule.2% of the first $7.000 in wages.000. similarly. a corporation needs to file its own tax return. you may spend money on publications like this. or even more each month. a corporation increases the complexity and workload of administering your business. While a sole proprietorship or informal real estate partnership may be able to keep its bookkeeping and income tax return preparation very simple.to a low but reasonable level.000 annually. a corporation will probably increase your banking. The bank may charge $10. business cards. or $434 per employee. Copyright © 2007. For starters. or $9. This increase in administrative complexity adds to your costs and your work. bump the prices they charge you. So an obvious question is “Why wouldn’t everyone become a corporation?” Perhaps predictably. Related to this point. a partnership or a C corporation. the bank account for a corporation probably won’t be free. The accountant and insurance company may. In this case. You will need to print new letterhead. while the bank account for a sole proprietorship or informal partnership may be free if you keep a large-enough balance. You may buy the services of accountants and attorneys.
such as where you’ve got a larger group of people who are contributing property to the corporation in stages. You may need to consult a tax practitioner. the control requirement is met when a proprietor incorporates his or her business. however. In other cases. as part of the incorporation. meeting the “control after incorporation” requirement may not be quite so easy. Obviously. Let me also make one other point about incorporating a business. A Slightly Different Set of Tax Rules… I also want to briefly summarize here the rules about how corporations are taxed. that transfer of liabilities may trigger taxes. And the control requirement is met when a partnership incorporates a partnership. If a sole proprietor or partnership incorporates a business and. again. Specifically. quarterly or annually) and annual stockholders meetings. 2008 by Fast Easy Incorporation Kits web site . And exchanges represent taxable events unless tax laws say otherwise. For example.Finally. Obviously. 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. tax laws do “say otherwise” in the typical cases of a sole proprietor or partnership incorporating the business. You’ll also need to keep good minutes of these meetings. 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. if a sole proprietor incorporates his or her business. I can’t summarize all of the tax law applicable to corporations in a few paragraphs. no tax effect should occur merely because the partnership has become a corporation. no tax effect should occur merely because the proprietorship has become a corporation. Fortunately. a corporation will mean that you need to have a board of directors (which will need to meet regularly such as monthly. 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. transfers liabilities to the corporation. Similarly. transferring liabilities as part of incorporation triggers taxes in two cases: Copyright © 2007. in any situation that isn’t like one of the preceding examples. 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. if a partnership incorporates its business.
get taxed on their income.000. a 25% federal tax on the next $25.000 – taxed at 35% $15.001 to $335. suppose someone starts a corporation solely by contributing a fully depreciated truck and that there’s a bank loan on the truck equal to $10.000. 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. But the effect is pretty easy to describe: The exchange in this case looks to the tax man like a sale.750 in federal corporate income taxes on the first $100. How C Corporations Get Taxed Regular corporations.001 to $10.000 – taxed at 34% $10.000 – taxed at 15% $50. Copyright © 2007. the business can count that deduction in its accounting records. and a 34% federal tax on the last $25.000. Case #2: If a person offloads more debt into the corporation than the depreciated basis of the property contributed to the corporation.000. If you work out the math.000. the corporation pays $22. for example. At the time I’m writing this.Case #1: If.001 to $100.001 to $15.000 – taxed at 39% $335. 2008 by Fast Easy Incorporation Kits web site . the transferred liabilities ($10. and the person contributing the property and transferring the liabilities will probably be taxed on the liabilities contributed.333 – taxed at 35% A corporation that makes $100.333. pays a 15% federal tax on the first $50.000.000) exceed the basis of the property contributed ($0).333. Anytime the corporation incurs or pays some expense that is ordinary and necessary for its business. The mechanics of how this works are beyond the scope of this short discussion.000 – taxed at 25% $75. Anytime the corporation earns or receives income.000. many small corporations attempt to extract all of the business profits in the form of salary.000. a corporation counts income and deductions the same way that a sole proprietorship or partnership does.001 to $18. for example. The person contributing the truck gets taxed on the $10.333 – taxed at 38% Over $18.000 – taxed at 34% $100. as part of incorporating a business. the excess of the liabilities over the basis of the property gets counted as income or gain. For example. Corporation Income and Corporation Deductions As a generalization.000.000 of profit. For this reason. the business needs to count that income in its accounting records. corporate income is taxed for federal tax purposes according to the following tax rate schedule: $0 to $50.001 to $75. called C corporations.000. In this case.
2% on the next $3. Corporate dividends paid by a C corporation.000 of profit is apportioned to Arkansas and $50.000 gets taxed at a flat rate of 6.000 of profit is apportioned to California. for example. the business still owes those states income tax on its profits. and 6% on the next $75.000. For example. of the profit.000 of profit is apportioned to Arkansas and $50. for example. $25.000. the apportionment formula apportions one third of the profit—the final $100. the corporation apportions its profit—usually using something called a three-factor formula. which is also a Arkansas corporation. the state of Arkansas levies a state corporate income tax that at the time of this writing equals 1% on the first $3. If a corporation operates in multiple states. In this case. 5% on the next $14.000. But business owners need to understand that if a corporation owns property. Multi-State Taxation of Corporations A corporation also pays state income taxes on the profits it earns in another state (if the state taxes corporate profits). Here’s a simple example of how this works.000—based on the payroll paid in the states where the business employs people. Taxable income in excess of $100. then another $50. does business in other states that tax corporate profits. California. 2008 by Fast Easy Incorporation Kits web site .000. Arkansas and Oregon. 3% on the next $5. that if the corporation pays a dividend to its shareholders out of its profits.000.000 of profit is apportioned to each of these four states. Note. if the corporation’s payroll is evenly split between Nevada.000. employs people.000. For example.000—based on the states in which the corporation sells its products or services.In addition. $50. the corporation generally owes taxes to that state—either income taxes (which most states charge) or gross receipts taxes. based on the states in which the corporation owns property. Finally. too. if the corporation has half of its property in Arkansas and half of its property in California. The apportionment formula apportions one third of the profit—another $100. those shareholders pay tax on the dividend. 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. that an Arkansas business. The three-factor apportionment formula apportions one-third of the $300. for example. or makes sales in a state.5% on the entire net taxable income. Copyright © 2007.000. If the corporation makes half of its sales in Arkansas and half in Washington. generally get taxed at a 15% federal rate. Suppose a corporation (and it doesn’t matter whether the corporation is a C corporation or an S corporation) makes $300.000 of profit is apportioned to Washington. Suppose. or $100.
a corporation distributes property rather than cash. a C corporation can often produce tax savings to the business owner because shareholder-employers can get tax-free fringe benefits. however. 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. After the previously taxed profits are exhausted and to the extent of any capital contributed to the corporation. I can’t give you a one-size-fits-all answer. gives you all the same liability protection. the corporation pays tax on the appreciation. 2008 by Fast Easy Incorporation Kits web site . In these cases. 2 Most business advisors. if the corporation distributes appreciated property (like real estate) to a shareholder. an S corporation can often save the owners thousands of dollars a year in income or payroll taxes. presumably you’ve already read this sort of comment from me before. as part of stopping business. the shareholders need to liquidate the corporation by selling all of the corporation’s assets. 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. That said. In essence. and then distributing all of the cash that’s still left over to the shareholders. think that the limited liability company is often a better choice for small businesses than a corporation. I will share these thoughts. For example. the corporation economically reduces business risk. but burdens you with less red tape. You’ll need to carefully consider the benefits and costs as they add up in your specific situation. or LLC. 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%). me included. an additional tax benefit (flexibility). In my opinion. so I won’t bang the LLC drum again. a limited liability company is a “lite” version of a corporation. One final note: If. paying off all of the corporation’s debts. 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. On the other hand. Copyright © 2007.Stopping a Corporation If a corporation stops doing business. the shareholders get tax-free returns of capital. Or alternatively. A limited liability company. As an added bonus. 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. For example. To the extent that distributions made to shareholders come from previously taxed profits. the incorporation option is uneconomical for very small businesses. the shareholders pay regular dividend tax rates (usually 15%) on the money.
The URL.ar. Download Articles of Incorporation from the Arkansas Secretary of State’s web site. or the abbreviation "Corp.”) The name must contain the words "Corporation".pdf 3. As a first step. you can reserve the name by filling out the proper form and paying the $22. Here’s an easy and free way to do this: You can search for a similarly named corporation using the Arkansas Secretary of State’s online database at: http://www. Identify the name you want to use for your new corporation. "Incorporated". or web page address. Acme Explosives Corporation Acme Explosives Corp. (Optional) Check if the corporation name you want is available. (I used the example name. 2008 by Fast Easy Incorporation Kits web site . Acme Explosives Limited.50 fee. or "Ltd.sosweb." or words or abbreviations of like import in another language.ar. Here’s what you do: 1. "Co. http://www. Copyright © 2007. you may want to check if the corporation name you want to use is even available.us/corp_ucc/corp_forms/forms/DN-01. all of the following names should be acceptable: Acme Explosives Incorporated Acme Explosives Inc. Acme Explosives Company Acme Explosives Co.state. “Acme Explosives Corporation.". This is an optional step.sosweb.". "Company". Enter your business or investment name onto the lines provided. For example. "Inc. and then print this form. "Limited".".state. Acme Explosives Ltd.php If you find a name that you wish to use but are not ready to submit the paperwork.us/corps/search_all. 2.Forming the Arkansas Corporation The actual steps you take to form an Arkansas state corporation are almost comically simple. for this form (see Figures 1 and 2) is as shown below.
Indicate the address in which the corporation office is located. You have a series of shares when you have more than one class or two or more of the same class but with different rules or regulations. A class of shares is a group of shares having the same general characteristics. Shares are with par value or without par value. Copyright © 2007. Acme Explosives Corporation will issue 1000 shares of common stock at $10 par value. you are an incorporator. State the number of shares your corporation will be authorized to issue. Accordingly. In this case. List the Incorporators An incorporator is someone who performs the act of incorporation and who signs the articles of incorporation and delivers them for filing. Typically. “Preferred’’ shares are those that are entitled to priority in payment of dividends. He or she is the person or entity designated by the corporation to receive any service of legal action or other official communication on its behalf. The registered agent may or may not be an owner. In this example. Provide your name and address as the registered agent. Shares without par value may be issued or sold at any price. 6. In the third article. 7. or officer. you will need to put your name and address as well as your signature on the bottom of the form. 2008 by Fast Easy Incorporation Kits web site . enter your name. classes are termed “common’’ or “preferred’’ or are given a special designation. 2 different preferred stocks. A post office box or “mail drop” may not be used as the registered agent address. Shares represent ownership interest in the corporation. Shares with a stated par value cannot be issued or sold at a price less than the stated par value.4. Every business corporation must designate in its certificate of incorporation the number of shares which the corporation shall have the authority to issue. one with a 5% payment of dividends would be the first series and one with a 7% payment of dividends would be the second series. “Common’’ shares are shares that have no preference over any other shares with respect to the payment of dividends. The registered agent’s address must be a street address in Arkansas. The registered agent is the “mailbox” for the corporation. For example. specify the address in which the corporation office is located. shareholder. and the agent must be located at that address. Therefore. 5. In the example shown in Figure 1. I entered 123 ABC St Anytown AR.
A corporation may be formed for any purpose or combination of purposes for which individuals lawfully may associate themselves. In this case. State the purpose of your corporation. Acme Explosives Corporation wholesales to miners. Copyright © 2007. 2008 by Fast Easy Incorporation Kits web site . You need to tell the Secretary of State what your corporation will do.8.
2008 by Fast Easy Incorporation Kits web site .Figure 1: Page 1 of Arkansas Articles of Incorporation document Copyright © 2007.
2008 by Fast Easy Incorporation Kits web site .Figure 2: Page 2 of Arkansas Articles of Incorporation document Copyright © 2007.
mail the document and a check for $50 to: Secretary of State State Capitol Little Rock. Tip: If you want to use stock certificates.7. 3. 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. among other items. Issuing Stock. 2. it takes several weeks to get your corporation certificate back from the Secretary of State’s office. you want to do all this exactly right. vice president. stock for which you don’t issue stock certificates—is probably easiest. treasurer. uncertificated stock— in other words. and according to your corporate by-laws. An observation: You typically do not need to be painstakingly precise about these tasks if you’re incorporating for tax reasons—if you’re incorporating to get tax-free fringe benefits out of a C corporation or if you’re incorporating to get the employment-tax savings of an S corporation. On the other hand. Arkansas 72201-1094 If you choose to fill the form out online (https://www. Electing Directors and Officers After the secretary of state certifies your corporation—and at this point. Copyright © 2007. You need to issue stock to the shareholders contributing cash or property. you can use uncertificated stock. your bank will probably also require the board of directors to approve setting up a bank account. secretary and so on. As a generalization. The sample corporate by-laws do allow you to use uncertificated stock. however. Processing lead times vary. if you’re incorporating principally to minimize your legal liability. And especially in the case where you are setting up a one-shareholder corporation which you will own and operate. your corporation legally exists—you still need to perform three other startup tasks: 1.org/sos/ofs/docs/index. Your board of directors needs to hold a board of directors meeting in which. 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.php) the fee is $45. but in general. the board elects officers to the roles of president. You need to follow your corporate by-laws as to how this process works. 2008 by Fast Easy Incorporation Kits web site . Submit the corporation application After you complete the Articles of Incorporation document.ark. You need to hold a stockholders meeting to elect a board of directors in accordance with your corporate by-laws. At this initial board meeting.
m. identifies your business entity and often allows you to do things like open a bank account. The online EIN application is not available 24 hours a day. make an electronic payment.state. many cities also have business permit and license requirements. apply for business licenses. Until your EIN is added to the permanent records. to 12:00 a. An EIN. to 9:00 p. 2008 by Fast Easy Incorporation Kits web site . or EIN.php Getting an EIN for Your New Corporation You will need to get an Employer Identification Number.arkansas.gov/government_local_search. also known as a Federal Tax Identification Number. and file any tax returns required for your corporation such as income tax returns and payroll tax returns.us/business_res.Friday 6:00 a. for your new corporation. or pass an IRS Taxpayer Identification Number matching program. Accordingly. if you do need an EIN. Arkansas requires a license of some businesses that operate in the state. to 12:30 a. You can find these numbers by going to: http://www.php?sessid=76b623865d7396ec7432c37e78ff2687& #Business%20Permits%20and%20Licenses You can also usually get local city business license information by calling city government offices in the town in which you plan to operate your business. you’ll want to identify and then acquire the necessary permits and licenses. the IRS makes its online EIN application available according to this schedule: Monday . In addition. Caution: The IRS takes up to two weeks to make your new EIN part of its permanent records.m. Eastern time Saturday 6:00 a.m.ar. Eastern time Copyright © 2007. 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. If you’ve set up an corporation for a business. you can't file an electronic return. At the time I'm writing this (spring of 2008).Licensing a Business in Arkansas As you probably know if you’ve worked or run a business in Arkansas. Eastern time Sunday 7:00 p.m.m. Arkansas provides a web site that gives information about many (if not most) businesslicensing requirements: http://www.m. online EIN application.
Go to the IRS website. What's more. Identify the legal and tax structures of your business entity. 2. If your new corporation will be treated for tax purposes as an S corporation. All you need to have is Internet access and a current Internet browser. the online EIN application brings you to a page that explains your choice. Go to the IRS online EIN application web page to begin the EIN online application: https://sa2. click the "Corporations" button.Fortunately.www4. This step is very important because each type of legal and tax structure has different rules and regulations. click the "S Corporation" button. you do not need special software to complete the online EIN application.irs. click the "Corporations" button. When the online EIN application says "You have chosen Corporations" and asks what type of corporation. click the "Corporations" button.gov/modiein/individual/index. you also do not need special computer skills to complete the online EIN application. When the online EIN application says "You have chosen Corporations" and asks what type of corporation. you can click on it to see a definition in a new window. The online EIN application asks questions and you simply provide the answers by filling in the blanks and checking boxes and buttons. Here are the precise steps for completing the online EIN application: 1. Go to the bottom of this page and click the “Continue” button. If a word or phrase appears blue and underlined. also known as a C corporation. If your new corporation will be treated for tax purposes as a regular corporation. Note: The IRS web site supplies definitions for most of the terms used in the online EIN application. 2008 by Fast Easy Incorporation Kits web site . Copyright © 2007.jsp Scroll to the bottom of the page and click the “Begin Application” button. After you indicate what type of legal and tax structure you've chosen for the new entity. Clicking on these definitions will not halt the progress of your application. as well as tax reporting requirements.
4. Provide the corporation's business location. you will click the “Started a New Business” button. Click the “Continue” button.3. When prompted by the online EIN application. The IRS also wants information about the principal officer.S. including name and Social Security or Individual Tax Identification Number. If the IRS sends a letter to the corporation. you should identify a corporation officer (probably the president or treasurer) as the person the IRS should contact when it has questions. 2008 by Fast Easy Incorporation Kits web site . Do not use any punctuation except for a hyphen or a back slash. Application for IRS Individual Taxpayer Identification Number form. explain why you are requesting an EIN. In a small corporation. if you use a middle initial. for example. Note: If the contact person is a nonresident alien and therefore doesn't have a Social Security Number. You need to designate a contact person--or what the online EIN application calls a principal officer. the person may be able to first obtain an Individual Tax Identification Number by completing a Form W-7. owner or general partner. address and may not be a PO box. State why you are requesting an EIN. Identify and describe a contact person of the corporation. For instance. The IRS considers the contact person to be the individual or business responsible for tax matters. they send the letter to the corporation in care of the person. Your choices are: § § § § § Started a New Business Hired Employees Banking Purposes Changed Type of Organization Purchased Active Business In general. 5. You need to provide a physical address of your corporation. This address must be a U. do not place a period after that initial. Click “Continue” after you identify the type of primary member or principal officer. Don't use any punctuation other than a hyphen (-) and ampersand (&) in the name. Copyright © 2007.
the name may not contain an ending such as LLC. and the corporation start date. LC. you will need to provide the corporation's start date. The online EIN application automatically fills in the county and state based on the physical address previously entered.e. Use the pull-down menu to select a month and year. This is the date on which the entity began doing business or will begin doing business. When prompted by the online EIN application. identify the state where the articles of organization or articles of incorporation were filed. however. Again. apartment numbers. you need to provide the name of the corporation. please make sure you provide the most essential address information (i. the trade name (if any). You can also provide a trade name. A trade name or "doing business as" name is another name under which the business or individual operates. if any. the online EIN application allows only two special punctuation characters: hyphen (-) and ampersand (&). This is typically the same state as the corporation's physical address. if necessary. Click the “Continue” button. Finally. the state where the articles of organization or formation are filed. The name you provide as the legal name of your corporation should match the articles of organization or articles of incorporation. Provide legal and trade name information about your corporation. Click the “Continue” button. etc). 2008 by Fast Easy Incorporation Kits web site . the county and state where the corporation is located. 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. Note: IRS systems only allow 35 characters on the street address line. or Inc. 6. 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. you should verify that both of these bits of information are correct. If you use a trade name. When prompted. suite numbers. Corp. However. you will be taken to a page to provide that address. again when prompted.. PLLC.You will also be required to provide a phone number. Copyright © 2007. If your address does not fit in 35 characters. If you do.
html. When prompted. Indicate whether the corporation is subject to special federal excise taxes. quarterly federal excise tax returns. Read the questions and answer them. you will be able to view the letter immediately and it will not be mailed to you. address and start date information. click on "Other" and then click the “Continue” button.7. 2008 by Fast Easy Incorporation Kits web site . 9. State How You Would Like to Receive Your EIN Confirmation Letter.com/products/acrobat/readstep2.adobe. choose a category that best describes your business. If you aren’t sure what a category includes. that you will need to have the Adobe Reader program installed on your computer. 10. This program can be downloaded for free from: http://www. If none of these options fit. Copyright © 2007. The last page of the online EIN application summarizes your information. the online EIN application asks a series of questions about vehicles. Print the summary page and check the information for errors. the answer will be “No” to all four questions. Click the “Continue” button. If none of the categories fit. tobacco and firearms. Note. If any of the information is incorrect. For most people. This may take up to four weeks. If you choose to receive the letter by mail. though. the IRS will send it to the mailing address you provided. Click the “Continue” button. gambling. After you provide the corporation name. and alcohol. You can receive your EIN confirmation letter online or by mail. you can click on that category for a further explanation. Verify Your Information. Then click the “Continue” button. If you choose “Other” you will be taken to a second page of options. 8. If you choose to receive it online. State what your corporation does. click on the “Other” button on this page and then type in what your corporation will do.
Applying for a New EIN using the Paper SS-4 Form As mentioned. However. click the “Submit” button to receive your EIN. the easiest way to get an EIN number is through the interview-style.start a new application.irs. 2008 by Fast Easy Incorporation Kits web site . For example. As compared to a regular corporation. "Application for an Employer Identification Number. after you determine the information is correct. you really should retrieve a copy of the SS-4 form and form instructions from the www. This process can take up to two minutes. Monday through Friday. S corporations often save the small business owner significant amounts of federal corporation income tax and payroll taxes. you can download a paper copy of the Form SS-4. Copyright © 2007. however. Tell the assistor you received an EIN from the Internet but can't remember it. also known as an S corporation. online EIN application described in the preceding paragraphs.10:00 p.pdf Applying for a New EIN by Telephone You can also obtain an EIN immediately by calling (800) 829-4933.irs. call (800) 829-4933 and select EIN from the list of options in order to speak with an IRS employee. Before calling for an EIN. .gov/pub/irs-pdf/iss4. the web address for the SS-4 form is: http://www.irs. If you forget your EIN number.gov. Then. Electing S Corporation Treatment for a Corporation A corporation may elect to be treated as a Subchapter S corporation. complete it.pdf The web address for the SS-4 form instructions is: http://www.m.gov web site and fill out the form as best you can before calling the number just given. and then mail or fax the completed SS-4 to the appropriate address or fax number. the IRS also provides other procedures for obtaining an EIN.gov/pub/irs-pdf/fss4. called a C corporation." from www. local time.m. At the time I'm writing this document. The hours of operation are 7:00 a.irs. Note: The unique prefixes 20 and 26 identify the EIN as a number issued via the Internet.
California. follow these steps: 1.4 However.htm. If you want an S election to be effective as of January 1. Washington and Wisconsin) must consent to the S election. Enough said. S corporations offer their owners and shareholder-employees some wonderful tax planning opportunities. To make the election to be treated as an S corporation. (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). You will want to contact them or a knowledgeable local tax practitioner for current information about any “late Subchapter S election procedures” procedure. New Mexico. no federal corporate income tax.com/taxationofcorporations. many tax traps exist for the unwary and the careless.3 Caution: I want to caution you one last time about making the S election: Before you elect.gov/pub/irs-pdf/f2553. citizens or permanent residents. and certain trusts and charities. (1) all shareholders (and shareholder spouses residing in community property states like Arizona. the precise web address for the 2553 form is: http://www. Idaho.SCorporationsExplained.fasteasyincorporationkits. you need to file the election by August 15. in other words.irs. you file Form 2553 with the Internal Revenue Service within 75 days from the start of the year. and (sometimes) substantial payroll tax savings.gov web site.S. To complete and file the IRS Form 2553. Download the election forms. Louisiana. 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). 4 You can get basic tax information on S corporations by visiting www. The precise web address for the 2553 instructions at the time I'm writing this is: http://www.com and from the http://www.gov/pub/irs-pdf/i2553.irs. At the time I'm writing this. Copyright © 2007.irs.In order to become an S corporation.pdf 3 The IRS may allow you to make a late S election. you need to file the election by March 15. a corporation must meet certain eligibility requirements. Texas. 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. (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. if you're going to grab an up-to-date copy of the form. estates of U. including pass-through of net operating losses. and (4) shareholders must generally be either U. In a nutshell.pdf It's also not a bad idea. citizens or permanent residents. Nevada. to also grab an up-to-date copy of the form instructions.S. 2008 by Fast Easy Incorporation Kits web site . Get the IRS 2553 form from the www.
Figure 3: Page 1 of an example completed 2553 Form. Copyright © 2007. 2008 by Fast Easy Incorporation Kits web site .
however. Provide the corporation’s name. the effective date of the S election is the incorporation date. Note. make an S election effective as of the start of the year (typically January 1). You shouldn't need to use this space if you're filing the election on time. Instead. or on the last day of September. October or November—only complicates your tax accounting and produces no real benefit for you. When corporations become S corporations after being a C corporation. This tells the IRS who to call if they have questions about the S election. Specify that the S corporation’s tax year will end on December 31. the IRS provides space for you to explain why you're filing a late 2553 election. 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. 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. the street address. October. Having a non-calendar fiscal year—an accounting year that ends in September. At the very top of the form (see Figure 3). 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. You should confer with a knowledgeable tax practitioner. You can also. 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. city and state. 5. 3. you probably. Copyright © 2007. however. 4. However. the new S corporation may be subject to special taxes and also be subject to several accounting rules too complicated for a doit-yourselfer. that the effective date can not be more than 75 days before the date on which you’re making the election (typically March 15). or November. you should not do this using a do-it-yourself approach. Note: If you think you want a non-calendar fiscal year end. in the block labeled “Type Or Print. and EIN information. Note: In the area beneath box H. however. Enter the effective date of your S election into Box E. address. 2008 by Fast Easy Incorporation Kits web site .” you enter the name of the corporation. you shouldn’t make the S election yourself. almost certainly want to mark the Calendar Year option in box F. Tip: You can elect Subchapter S status for a corporation that’s previously operated as a regular C corporation. S corporation fiscal years can end on December 31. Typically.2. Enter your name and telephone information into Box H. and the employer identification number. Accordingly.
Nevada. Note: You won't need to worry about the third page of the 2553 form (see Figure 5). Texas. K. If you've already goofed up the S election deadline. if needed. Sign the S election Form. 2008 by Fast Easy Incorporation Kits web site . 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. You need to provide each shareholder name and address in column J. Washington. 6. M. you can enter those percentages into column L. Louisiana. Idaho. by the way. Name and get signatures from each shareholder and. Note that in the case of non-shareholder spouse. is that you not try to file a late election yourself. and N to name each shareholder in the new S corporation. On page 2 of the 2553 form (see Figure 4). enter the month and day that each shareholder’s tax year years. You must use column L to identify the number of shares that each shareholder holds. You need to have each shareholder sign and date the S election in column K. You need to enter each shareholder’s social security number into column M. and you want to have someone who understands the most current special procedures do the election. Copyright © 2007. 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. New Mexico. 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. Wisconsin and sometimes Alaska and Puerto Rico). shareholder spouse. certified public accountant or enrolled agent who specializes in S corporations to fix your election. 7. 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. L. Finally. If owners don’t hold shares but only percentage interests. you probably want to pay a lawyer.My suggestion. if any of your shareholders resides in a community property state (Arizona. California.) As mentioned earlier in this ebook. However. use columns J. (This should be December 31 in the case of most individuals. The IRS typically has special procedures for making these late elections.
Copyright © 2007. 2008 by Fast Easy Incorporation Kits web site .Figure 4: Page 2 of an example completed 2553 Form.
Figure 5: Page 3 of an example completed 2553 Form. Copyright © 2007. 2008 by Fast Easy Incorporation Kits web site .
Indiana. Arkansas. you can see which mailing address or fax number you can use for your state using the table below. West Virginia. Delaware. Maine. OH 45999 Fax: (859) 669-5748 Department of Treasury Internal Revenue Service Center Ogden. Colorado. District of Columbia. Wyoming Then use the following mailing address or fax number to submit 2553 Department of Treasury Internal Revenue Service Center Cincinnati. office or agency address is located in state of: Connecticut. Massachusetts. Florida. Virginia. 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. Alaska. Certified mail with a delivery receipt isn't a bad idea. Especially with the IRS. If your principal business. but nowadays. 2008 by Fast Easy Incorporation Kits web site . 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. if you act immediately you can often still fix a problem before the election deadlines expire. Idaho. Michigan. Montana. Louisiana. cross your fingers and then make a late election via mail if there's a deadline problem. Nebraska. South Carolina. Kentucky. Utah. Oklahoma. Rhode Island. Washington. Kansas. North Dakota. Copyright © 2007. Mississippi. Illinois. Pennsylvania. South Dakota. Nevada. Ohio. Vermont. New Hampshire. Georgia. Wisconsin Alabama. UT 84201 Fax: (801)-620-7116 Some Closing Caveats and Comments Before I end this short booklet. Fax or Mail the 2553 Form to make the federal S election.8. Minnesota. New Mexico. California. New York. In any case. Missouri. Maryland. Iowa. New Jersey. Oregon. Arizona. North Carolina. the IRS is so forgiving about late S elections that it's probably just as easy to fax the completed 2553 form. I want to share a handful of quick comments: 1. I used to suggest that people mail the 2553 form using certified mail with a delivery receipt. 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. Tennessee. attempt to immediately resolve any problems by telephoning the Secretary of State’s office or the local IRS office. Texas.
2. Don’t put assets that may appreciate (such as real estate) into a corporation without consulting a knowledgeable tax attorney or a CPA. instead. But if you’re having trouble. 7. a regular C corporation can often have an accounting. or “fiscal. for example. 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. 2008 by Fast Easy Incorporation Kits web site . such as from the U. you often can support a salary that allows you to save on taxes. can be several thousand dollars a year. say. I mentioned this before. 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). give up on the “do-it-yourself” approach and. The “cost” of fouling up an S election.000 in payroll taxes. Most of the time.” year that ends on the last day of any month of the year. a smart person who’s careful can work through the paperwork themselves. 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. My strong suggestion to my clients is that they collect independent salary data to support what their S corporation pays shareholderemployees in wages. Government’s Bureau of Labor Statistics. It’s truly foolish to save yourself $500 of attorneys’ fees but end up paying an extra $5. don’t waste time trying to fix a problem you don’t understand. may often use a non-calendar year for their accounting.S. If you can’t resolve the problems yourself. 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. 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. For corporations that use a calendar year ending December 31. if your corporation begins doing business in. 5. Montana. In other words. county and city government agencies. 3. before you finish setting up your corporation: In general. 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. C corporations. S corporations may be able to use a non-calendar year. you should probably assume that the IRS will challenge an unreasonably low or high salary. Copyright © 2007. enlist the services of a local professional. Note that with good salary data. 6. 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. Something you should know now. 4. you will need a certified public accountant or enrolled agent to prepare a corporate tax return for your new corporation. In fact. For example. however. Corporation tax returns for both C and S corporations are due 75 days after the end of the tax year.
2008 by Fast Easy Incorporation Kits web site .Appendix A Sample Corporate By-laws Copyright © 2007.
m.2. Offices. 2. 2008 by Fast Easy Incorporation Kits web site . without notice other than announcement at the meeting. At such reconvened meeting at which a quorum Copyright © 2007. 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. Written notice of each shareholders meeting stating the place. Annual Meetings.1. If said notice is for a shareholders meeting other than an annual meeting. it will in addition state the purpose or purposes for which said meeting is called. 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. present in person or represented by proxy. both within and without the state in which it is incorporated. 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. in addition to its registered office in the state in which it is incorporated. 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. Quorum. 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. such quorum will not be present or represented at any meeting of the shareholders. and the business transacted at such meeting will be limited to the matters so stated in said notice and any matters reasonably related thereto. unless otherwise prescribed by the articles of incorporation or law.Bylaws of ______________________________________________ Formed under the laws of the state of _______________________ (the “Company”) 1. 2. 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.3. Special Meetings. Annual meetings of shareholders will be held at 10:00 a. have such other offices and places of business. Such request of the Board or shareholders will state the purpose or purposes of the proposed meeting. however. 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. present in person or represented by proxy. Notices. until a quorum will be present or represented. 2. The presence at a shareholders meeting of the holders. will have power to adjourn the meeting from time to time. 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 shareholders entitled to vote thereat. Special meetings of the shareholders. 2. Shareholder Meetings. The Company may.4. 2.
5. a different vote is required. any business may be transacted which might have been transacted at the meeting as originally notified.2. or which may be taken. The list will also be produced and kept at the time and place of the meeting during the whole time thereof. 2.5.2. unless the question is one upon which. by express provision of the articles of incorporation or law. Voting of Shares.will be present or represented. and may be inspected by any shareholder who is present. Such list will be open to the examination of any shareholder. 2. will be signed by all of the holders of outstanding stock entitled to vote thereon. The officer who has charge of the stock ledger of the Company will prepare. 2. 3. 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. for any purpose germane to the meeting. present in person or represented by proxy. Directors. 3. at the registered office of the Company.5. 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. When a quorum is present at any meeting. Plurality. 2008 by Fast Easy Incorporation Kits web site . Voting Lists. 2. at any meeting of shareholders may be taken without a meeting.1. Any action required to be taken.1. 3. setting forth the action so taken. Proxies. the vote of the holders. Election. 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.3. If any such adjournment is for more than 30 days. 2. a new notice of said meeting will be given to each shareholder entitled to vote at such meeting. Number. 3. The business of the Company will be managed by or under the direction of the Board. without prior notice and without a vote. in which case such express provision will govern and control the decision of such question. if a consent in writing. or if after the adjournment a new record date is fixed for the reconvened meeting.5. The number of directors constituting the Board will never be less than one and will be determined by resolution of the Board. which may exercise all such power of the Company and do all such lawful acts and things as are not by these bylaws. at least ten days before every meeting of shareholders. Unless otherwise provided in the articles of incorporation.5. Consents in Lieu of Meeting.5. Directors need not be shareholders or residents of the state in which the Company is incorporated. All directors will be elected by the shareholders at each annual shareholders meeting. during ordinary business hours for a period of at least ten days prior to the meeting. 2.3. the articles of incorporation or law directed or required to be exercised or done by the shareholders. unless the proxy provides for a longer period.5. Purpose. Votes Per Share.4. Copyright © 2007. No proxy will be voted on after eleven months from its date.
as the case may be.5. Any director so elected by the Board will have a term terminating with the next election of one or more directors by the shareholders. and the writing or writings are filed with the minutes of proceedings of the Board or committee. Copyright © 2007. The Board will meet as soon as practicable after the adjournment of each annual shareholders meeting. No such payment will preclude any director from serving the Company in any other capacity and receiving compensation therefore. Annual Meeting. Quorum. any director or the entire Board may be removed.3. If a quorum will not be present at any meeting. The president or secretary will call a special meeting of the Board on the written request of two (b) directors or the sole director. without notice other than announcement at the meeting. either personally or by mail or telegram. No more than two (b) newly-created directorships may be filled by the Board between any two (b) successive annual shareholders meetings. though less than a quorum. by a majority vote of the shares entitled to vote at an election of directors. if any. 4. any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting. Special Meetings. Regular Meetings. except as may be otherwise expressly provided by the articles of incorporation or law. the directors present thereat may adjourn the meeting from time to time. Unless otherwise restricted by these bylaws or the articles of incorporation. Unless otherwise restricted by these bylaws or the articles of incorporation. Plurality. consent thereto in writing. Compensation. Special Meetings of the Board may be called by the president on one day’s notice to each director. Regularly scheduled. No notice to the directors will be necessary legally to convene this meeting. 4. Consent in Lieu of Meeting. A majority of the directors will constitute a quorum for the transaction of business at any meeting of the Board. 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. 4. 4. 2008 by Fast Easy Incorporation Kits web site . The directors may be reimbursed their expenses.5.6. Meetings of the Board. until a quorum is present. with or without cause. Vacancies. Vacancies in the Board may be filled by a majority vote of the remaining directors.4. Unless otherwise restricted by these bylaws or the articles of incorporation.3. if all members of the Board or committee. A director elected to fill a vacancy will be elected for the unexpired term of his predecessor. 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. Removal. 220.127.116.11. the Board will have the authority to fix the compensation of directors. 4. 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. 4. as the case may be. provided a quorum is present. Members of committees of the Board may be allowed like compensation for attending committee meetings. 3.
The Board may by resolution establish. 5.3. will have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company. recommend to the shareholders the sale. No committee of the Board will have the power or authority to amend the articles of incorporation. Chairman of the Board. unless the resolution establishing such committee.1. fill a vacancy in the Board or any committee thereof.1. the vice presidents in the order determined by the Board. these bylaws or the articles of incorporation expressly so provide. Each committee will keep regular minutes of its meetings and report the same to the Board when required. In the absence of the chairman of the Board or in the event of his inability or refusal to act. fix the compensation of any member of such committee. the articles of incorporation and law. 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. 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. to the extent provided in the resolution of the Board establishing such committee and as limited by these bylaws. 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. Unavailable Powers.2. In the absence of the president or in the event of his inability or refusal to act. lease or exchange of all or substantially all of the Company’s property and assets other than in the ordinary course of business. 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. Committees of Directors. 5. Establishment. deeds of trust and other contracts requiring a seal under the seal of the Company. or. Available Powers. or if there be no such determination.1. Elected Officers. the vice president (or in the event there be more than one vice president.5. 2008 by Fast Easy Incorporation Kits web site . cause the dissolution of the Company or a revocation of such a dissolution. amend the bylaws of the Company. amend or repeal any resolution of the Board which provides that it will not be so amendable or repealable. Officers. Any such committee. and when so acting. the president will preside at all meetings of the shareholders and the Board. declare a dividend or authorize the issuance of stock. 6. adopt a plan of merger or consolidation. 6.3. 5. The chairman of the Board will preside at all meetings of the shareholders and the Board. The president will be the chief executive officer of the Company.1. then in the order of their election) will perform the duties of the president.2.1.1. 6. will have all the powers of and be subject to all the restrictions upon Copyright © 2007. each committee to consist of one or more of the directors. President. name or dissolve one or more committees. The Board will elect a president and a secretary (collectively. 6. Vice Presidents. The president will execute bonds. and may authorize the seal of the Company to be affixed to all papers which may require it.
Assistant Secretaries. then in the order of their election or appointment) will. papers. 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. the assistant secretaries in the order determined by the Board (or if there be no such determination.1. the assistant treasurers in the order determined by the Board (or if there be no such determination. Divisional Officers. or when the Board so requires. Any number of such offices may be held by the same person. an account of all his transactions as treasurer and of the financial condition of the Company.1. it may be attested by his signature or by the signature of such assistant secretary.8. or cause to be given. Each division of the Company.5. if there be more than one. treasurer or controller and one or more vice presidents.the president. may have a president. 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. assistant treasurers and other assistant officers. then in the order of their election or appointment) will. 6. If required by the Board.1.1. 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. 6. vouchers. Secretary. 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. The treasurer will have custody of the corporate funds and securities. 2008 by Fast Easy Incorporation Kits web site . money and other property of whatever kind in his possession or under his control belonging to the Company. The assistant treasurer or. and will render to the president or to the Board.6. 6. 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. Treasurer. 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 Copyright © 2007.1. 6. and when so affixed. The assistant secretary or. assistant secretaries. taking proper vouchers for such disbursements. if there be more than one.7. if any. at its regular meetings. resignation. 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. secretary. 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.4. in the absence of the secretary or in the event of his inability or refusal to act. 6. The secretary will attend all meetings of the shareholders. report to and serve at the pleasure of the Board and such other officers that the Board may place in authority over them. 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. in the absence of the treasurer or in the event of his inability or refusal to act. Assistant Treasurers. He will give. retirement or removal from office of all books. 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. He will disburse the funds of the Company as may be ordered by the Board.
Every holder of the capital stock of the Company. and (b) the Company will furnish a copy of such statement without charge to each shareholder upon request therefore. an assistant treasurer. will be entitled to have a certificate. Shareholder and Director Officeholders. 7. limitations or restrictions of such preferences and/or rights will. possessing authority over or responsibility for any functions of the Board will be elected officers.2.5. Appointed Officers. Entitlement to Certificates. and (b) the treasurer. Vacancies. Officers.2. 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. Officers need not be shareholders or residents of the state in which the Company is incorporated.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. 6. and the titles and duties of such appointed officers may be as described in Section 6. in lieu of such statement. such as the chairman of the Board. certifying the number of shares owned by him. If the Company will be authorized to issue more than one class of capital stock or more than one series of any class. the secretary Copyright © 2007. 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. as it will from time to time deem necessary. provided that the Required Officers and any other officer. assistant officers and agents or delegate the power to do the same.3. the president or any vice president. 7. Signatures. 7. Salaries. 7. prepared in accordance with applicable law.3. 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.4. The salaries of elected officers will be set by the Board. where so authorized. retirement. unless the Board will by resolution provide that such class or series of stock will be uncertificated. a statement of the powers. Any number of offices may be held by the same person. provided that. participating. Multiple Classes of Stock. unless these bylaws or the articles of incorporation otherwise provide. 6. The Board may also appoint or delegate the power to appoint such other officers. such as the chairman of the Board. The Board will also fill any vacancy in an elected office. disqualification. resignation or removal from office. 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. 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. 2008 by Fast Easy Incorporation Kits web site . 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. 6. preferences and relative. routinely possessing authority over or responsibility for any functions of the Board must be directors. 6. optional or other special rights of each class of stock or series thereof and the qualifications. Share Certificates. to the extent allowed by law.1 for elected officers. assistant officers and agents and may also remove such officers. designations. Multiple.1. Election.
within or without the state in which the Company is incorporated. as will be designated from time to time by the Board and stated in the notices thereof. except as otherwise required by law.or an assistant secretary of the Company. 7.5. A record date validly fixed for any meeting of shareholders will be valid for any adjournment of said meeting and will. a record date. Registered Shareholders. 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. stolen or destroyed certificate or certificates. assignation or authority to transfer said shares and of the payment of all taxes applicable to the transfer of said shares. 7. Place of Meetings. of a certificate for shares duly endorsed or accompanied by proper evidence of succession. 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. 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. 8. stolen or destroyed certificate or certificates. cancel the old certificate and record the transaction upon its books. 8. the signatures of the officers of the Company may be facsimiles. stolen or destroyed certificate or certificates.1. in advance. Lost Certificates. in its discretion and as a condition precedent to the issuance thereof. the Company will be obligated to issue a new certificate to the person entitled thereto. the Board may fix. 7. require the owner of such lost. Fixing Record Date. which will not be more than 60 nor less than ten days prior to any such action. to express consent to corporate action in writing without a meeting. When authorizing such issue of a new certificate or certificates. stolen or destroyed upon the making of an affidavit of that fact by the owner of the allegedly lost. whether or not it will have express or other notice thereof.7. Where a certificate is countersigned by either (a) a transfer agent other than the Company or any employee thereof. conversion or exchange of stock or to effect any other lawful action. If no Copyright © 2007. Transfer of Stock. Upon surrender to the Company or to its transfer agent. 7. or his legal representative. be valid for any reconvenings and readjournments of said meeting made no later than 90 days after said record date.6. All shareholders and directors meetings will be held at such place or places. the Board may.4. or (b) a registrar other than the Company or any employee thereof. 2008 by Fast Easy Incorporation Kits web site . to exercise any rights in respect of any change. or the legal representative thereof. the certificate may be issued by the Company with the same effect as if such officer held such office on the date of issue. Miscellaneous. if any. to receive payment of any dividend or other distribution or allotment of any rights. at the Board’s election. 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. 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. 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.
Means of Giving Notice. telex or telegram transmission. (c) deposit with a recognized courier company.7. the articles of incorporation or these bylaws. Whenever. and such participation in a meeting so held will constitute presence in person at the meeting. Dividends on the capital stock of the Company. determines proper as a reserve or reserves to meet contingencies. 8. and at any special meeting of shareholders when called for by vote of the shareholders. the articles of incorporation or law. a full and clear statement of the business and condition of the Company. if given pursuant to clause (a) of the previous sentence. cable. 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. for equalizing dividends. Reports to Shareholders. Checks. Whenever any notice is required to be given under law. members of the Board. but such notice may be given by (a) personal delivery. (b) deposit in the United States mail. Waiver of Notice. under these bylaws. Reserves. will be deemed equivalent to such required notice. 8. 8. 8. a written waiver of such notice. it will not be construed to mean personal notice. 8. paid in cash. property or shares of capital stock and as may be limited by these bylaws. Dividends. notice is required to be given to any person. Copyright © 2007. the articles of incorporation or law applicable to the Company. and the Board may modify or abolish any such reserve in the manner in which it was created.4. (2) on the earlier of (i) the fourth day after deposit.5. may be declared by the Board at any meeting thereof. prepaid. Fiscal Year.9.such place is so designated. if given pursuant to clause (d) of the previous sentence. or (ii) the time verification is made of delivery. 8. The fiscal year of the Company will be fixed by resolution of the Board. Unless otherwise restricted by these bylaws. prepaid. or (3) when received. 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. return receipt requested. 2008 by Fast Easy Incorporation Kits web site .8. said meetings will be held at the registered office of the Company. The Board will present at each annual meeting of shareholders. return receipt requested. signed before or after the date of such waiver by the person or persons entitled to said notice. the articles of incorporation or law. 8.6. in its absolute discretion.2. or (d) facsimile.3. 8. 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. Before payment of any dividend. 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. 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. Any such notice will be deemed to be received (1) when delivered. if given pursuant to clauses (b) or (c) of the previous sentence. Attendance Via Communications Equipment.
affixed or otherwise reproduced. unless and to the extent the power of either is limited by the articles of incorporation. Seal. altered. alteration. repealed or replaced by the Board and by the shareholders. The seal may be used by causing it or a facsimile thereof to be impressed.8. 2008 by Fast Easy Incorporation Kits web site . These bylaws may be adopted. 8. amended. at any annual shareholders meeting or annual or regular meeting of the Board.11. or at any special meeting of the shareholders or of the Board if notice of such adoption.10. The seal of the Company will be in such form as may from time to time be adopted by the Board. END Copyright © 2007. Amendments. repeal or replacement is contained in the notice of such special meeting. amendment.
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