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Do-It-Yourself Incorporation Kit: Montana 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 a Montana corporation. Specifically, I provide step-by-step instructions for completing several legal and tax documents related to forming a Montana corporation, including filing the articles of incorporation with the Montana 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 Montana 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 Montana Corporation
Corporations deliver two huge benefits to Montana 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
Let me issue a caveat here. “Oh. the business owners or investors could lose not only their investment in the business but many other personal assets. the partners in the partnership are liable. an owner (called a stockholder or shareholder) can say. You may not get as much legal liability protection from a corporation as you want or hope. The owner can’t say. the “worst case scenario” is liquidation of the corporation. that was the corporation’s debt… not me. But all the owners lose is what they’ve invested in the corporation. sorry. In a worst case scenario. But these outside creditors would not be able to look to the corporation’s owners for repayment merely because they own the corporation. That liquidation means the people who own the corporation wind up with nothing—which isn’t good. If the business breaches a contract or makes and then breaks a financial promise.” A business organized as a general partnership works the same way. without a corporation. that you’re a roofing contractor operating as a corporation. These owners can’t say. and even many personal belongings. for example. Say.To best understand what this limited liability protection means. that was my business that made the promise or commitment. One local attorney I often collaborate with tells his clients that a corporation (as well as its cousin. Obviously. however. 2008 by Fast Easy Incorporation Kits web site . as well as a certain amount of equity in a home. you need to consider the situation that exists with respect to businesses that are un-incorporated. you typically can’t really lose everything.1 In other words. 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. sorry. 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. with a corporation. In a sole proprietorship. With a corporation as the property owner.” In comparison. State and federal laws often protect individuals from the claims of creditors. If you personally happen to drop a hammer onto the customer’s head during the roofing project. For example. In comparison. “Oh. “oh. 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. Copyright © 2007. the proprietor is responsible for all the debts of the business. retirement savings may be protected.” Consider what this means for a small business. however. 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. for example. sorry. so says my attorney friend. your corporation probably won’t protect 1 A tangential side note: Even in the worst case scenario. the legal liability protection provided by a corporation can be extremely valuable. that was the partnership… not me.
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. drops a hammer on the customer’s head? The corporation may offer you some protection in this case. employee housing (in some cases). regularly get an attorney involved in your business or investment planning. 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. which makes things murkier. In other words. 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. The customer might reasonably argue that you should have done a better job managing the employee or subcontractor. And here’s another example. for example. small business corporations provide two tax benefits to their owners. And this is true even if the only employee is a shareholder. a modest amount of life insurance.” Or a business owner might. In other words. the customer can probably look not only to your corporation for payment of damages related to the dropped hammer but also to you personally.you from that sort of tort liability. As a general rule. A C corporation (but not an S corporation which I discuss next) can typically provide tax-free fringe benefits to all of its employees. 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. Here’s what all this means. An attorney knowledgeable in Montana business law can help you increase the liability protection that you gain from using as corporation for your business or investing. “I guarantee that my corporation will satisfy all of its obligations to you and if it doesn’t. one of your employees or subcontractors. and so on. And this consultation doesn’t need to be particularly expensive. reimbursement of medical expenses. Finally. I will personally pick up the tab. But you may still be personally responsible as the manager of the person dropping the hammer. in effect. What happens if someone working for you. If you’re extremely concerned about the asset protection features of setting up and operating a corporation. A business owner might give a personal guarantee to a bank or vendor that says. The first potential tax saving associated with incorporating your business applies to what the tax laws call a C corporation. 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.
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. each business owner also pays an employment tax equal to roughly 15% on the first $100. This proprietor or partner will pay roughly $15.000 of profit and then roughly 3% on any profit above $100. the employment taxes are called self-employment taxes.000 and $10.000 in a year. note that these employment taxes are in addition to the income taxes he or she pays on the $200. 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 those regular C corporations and their employees pay. To show you how the employment taxes work. 2008 by Fast Easy Incorporation Kits web site . (Those income taxes probably total another $30.000 on the second $100.000 of business profit. the employment taxes are called Social Security and Medicare taxes. Tax-free fringe benefits.deductions by tax laws.) Copyright © 2007.000 a year in tax-free fringe benefits to that employee.000. But—and here’s the neat thing—the deductions aren’t taxed to employees. In a nutshell. In the case of a shareholder-employee in a corporation. Yet those benefits. In addition to income tax.000 in tax on the first $100. then.000 of profit. Subchapter S status.000 of business profit and $3. Caution: If you want to explore or exploit the tax-free fringe benefits angle in more detail.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. though. A corporation also affords its owners a second potential tax saving opportunity. money that a business owner makes in an active trade or business is not subject just to income taxes. In a situation where a one-employee-one-shareholder corporation provides full health benefits and housing to its single shareholder-employee.000 of employment taxes. To understand this benefit. the corporation might be providing $20.000 or $30. If the single shareholder-employee extracts all of the $200. Again.000 or $40. would not be taxable to the employee.000 each year.000 of business profit. while tax deductions for the corporation. and he or she will pay roughly $3. the business owner pays roughly $18. or a single shareholder in a regular corporation (called a C corporation by tax laws) makes $200.000. suppose a sole proprietor. In all three of these cases. allow a small corporation’s owners to enjoy some of their business profits tax free. a partner in a partnership.000 in tax on the first $100.000 of profit. Note: In the case of a sole proprietorship or partners in a partnership. and I’m being a little rough here. And this would mean that the annual tax savings would very likely run between $5.000 on the second $100.
Related to this point. or $434 per employee. For example. In this case. an S corporation saves the shareholder-employee roughly $9. there are costs and headaches associated with incorporating. the bank account for a corporation probably won’t be free. 2008 by Fast Easy Incorporation Kits web site . 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. 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. the employment tax equals 15% of only the $60. while the bank account for a sole proprietorship or informal partnership may be free if you keep a large-enough balance. Perhaps this means wages equal to $60.000 annually. similarly. or even more each month.Things work differently if the corporation elects to be treated as a Subchapter S. extra payroll tax (the Federal Unemployment Tax).000 a year but is operated as a sole proprietorship.2% of the first $7. a partnership or a C corporation. This tax equals as much as 6.000. In this case. making an owner a corporate employee results in a new. the corporation probably sets the shareholder-employee’s wages to a low but reasonable level. accounting and insurance costs. corporation. The bank may charge $10. or S. bump the prices they charge you. a corporation needs to file its own tax return. While a sole proprietorship or informal real estate partnership may be able to keep its bookkeeping and income tax return preparation very simple.000 in wages. For starters. This increase in administrative complexity adds to your costs and your work.000 annually. a corporation will probably increase your banking.000 an employer pays individual employees in wages. Increased Administrative Complexity… As a general rule. $20. And this tax return may cost anywhere from a few hundred dollars to a few thousand dollars annually. Copyright © 2007. a corporation increases the complexity and workload of administering your business. 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. The accountant and insurance company may. or $9.
Obviously. Fortunately. no tax effect should occur merely because the proprietorship has become a corporation. Finally. For example. you may spend money on publications like this. 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. tax laws do “say otherwise” in the typical cases of a sole proprietor or partnership incorporating the business. no tax effect should occur merely because the partnership has become a corporation. 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. I can’t summarize all of the tax law applicable to corporations in a few paragraphs.A corporation may involve several hundred or even a few thousand dollars of startup expense. Obviously. 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. quarterly or annually) and annual stockholders meetings. 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. And exchanges represent taxable events unless tax laws say otherwise. 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. A Slightly Different Set of Tax Rules… I also want to briefly summarize here the rules about how corporations are taxed. however. business cards. You’ll also need to keep good minutes of these meetings. 2008 by Fast Easy Incorporation Kits web site . such as where you’ve got a larger group of people who are Copyright © 2007. if a partnership incorporates its business. if a sole proprietor incorporates his or her business. in any situation that isn’t like one of the preceding examples. again. In other cases. You may need to consult a tax practitioner. Similarly. For example. You may buy the services of accountants and attorneys. a corporation will mean that you need to have a board of directors (which will need to meet regularly such as monthly. You will need to print new letterhead. And the control requirement is met when a partnership incorporates a partnership. the control requirement is met when a proprietor incorporates his or her business.
a corporation counts income and deductions the same way that a sole proprietorship or partnership does. If a sole proprietor or partnership incorporates a business and. the business can count that deduction in its accounting records.000. Let me also make one other point about incorporating a business. At the time I’m writing this. and the person contributing the property and transferring the liabilities will probably be taxed on the liabilities contributed.000 – taxed at 39% $335.000) exceed the basis of the property contributed ($0).contributing property to the corporation in stages.001 to $10.000 – taxed at 25% $75.000.001 to $335. that transfer of liabilities may trigger taxes. But the effect is pretty easy to describe: The exchange in this case looks to the tax man like a sale. 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. 2008 by Fast Easy Incorporation Kits web site . Anytime the corporation incurs or pays some expense that is ordinary and necessary for its business. corporate income is taxed for federal tax purposes according to the following tax rate schedule: $0 to $50. Corporation Income and Corporation Deductions As a generalization.000 – taxed at 34% $100.000 – taxed at 15% $50.001 to $100. The person contributing the truck gets taxed on the $10. meeting the “control after incorporation” requirement may not be quite so easy. For example. For this reason. Case #2: If a person offloads more debt into the corporation than the depreciated basis of the property contributed to the corporation. the transferred liabilities ($10. called C corporations. The mechanics of how this works are beyond the scope of this short discussion. get taxed on their income. for example.000. Anytime the corporation earns or receives income.000 – taxed at 34% Copyright © 2007. as part of incorporating a business. In this case. Specifically. 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. the business needs to count that income in its accounting records. How C Corporations Get Taxed Regular corporations. transfers liabilities to the corporation. transferring liabilities as part of incorporation triggers taxes in two cases: Case #1: If.001 to $75. as part of the incorporation. the excess of the liabilities over the basis of the property gets counted as income or gain. many small corporations attempt to extract all of the business profits in the form of salary.
the business still owes those states income tax on its profits. Montana also levies either a 6.000. generally get taxed at a 15% federal rate. a 25% federal tax on the next $25.000. for example. if the corporation’s payroll is evenly split between Nevada. Suppose. Copyright © 2007. for example. does business in other states that tax corporate profits.001 to $15. Suppose a corporation (and it doesn’t matter whether the corporation is a C corporation or an S corporation) makes $300.000 – taxed at 35% $15. For example.75% or 7% state corporate income tax on corporations (depending on the accounting elections the corporation makes). if the corporation has half of its property in Montana and half of its property in California. based on the states in which the corporation owns property. 2008 by Fast Easy Incorporation Kits web site . then another $50.000 of profit is apportioned to Montana and $50. the apportionment formula apportions one third of the profit—the final $100. that a Montana business.333.000. and a 34% federal tax on the last $25.333 – taxed at 38% Over $18.000.000 of profit is apportioned to Washington.750 in federal corporate income taxes on the first $100. pays a 15% federal tax on the first $50. which is also a Montana corporation.$10. 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). For example. Finally. the corporation pays $22. or $100. California. for example. $50.333 – taxed at 35% A corporation that makes $100.001 to $18.000. Note.000—based on the states in which the corporation sells its products or services. If the corporation makes half of its sales in Montana and half in Washington. The apportionment formula apportions one third of the profit—another $100. The three-factor apportionment formula apportions one-third of the $300. If a corporation operates in multiple states.000. too. Montana and Oregon.000.000. In this case.000 of profit.000 of profit is apportioned to each of these four states.000. the corporation apportions its profit—usually using something called a three-factor formula.000 of profit is apportioned to California. of the profit. for example. At the time of this writing. Corporate dividends paid by a C corporation. that if the corporation pays a dividend to its shareholders out of its profits.000 of profit is apportioned to Montana and $50. those shareholders pay tax on the dividend. Here’s a simple example of how this works. $25.000. If you work out the math.333.000—based on the payroll paid in the states where the business employs people.
After the previously taxed profits are exhausted and to the extent of any capital contributed to the corporation. an additional Copyright © 2007. In my opinion. the shareholders get tax-free returns of capital. as part of stopping business. You’ll need to carefully consider the benefits and costs as they add up in your specific situation. In essence. the corporation generally owes taxes to that state—either income taxes (which most states charge) or gross receipts taxes. me included. I will share these thoughts. 2008 by Fast Easy Incorporation Kits web site .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. In these cases. paying off all of the corporation’s debts. a corporation distributes property rather than cash. the incorporation option is uneconomical for very small businesses. the shareholders pay regular dividend tax rates (usually 15%) on the money. and then distributing all of the cash that’s still left over to the shareholders. For example. employs people. think that the limited liability company is often a better choice for small businesses than a corporation. 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. however. if the corporation distributes appreciated property (like real estate) to a shareholder. But business owners need to understand that if a corporation owns property. A limited liability company. the corporation pays tax on the appreciation. 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. To the extent that distributions made to shareholders come from previously taxed profits. For example. or makes sales in a state. Stopping a Corporation If a corporation stops doing business. 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%). a limited liability company is a “lite” version of a corporation. gives you all the same liability protection. the corporation 2 Most business advisors. or LLC. the shareholders need to liquidate the corporation by selling all of the corporation’s assets. I can’t give you a one-size-fits-all answer. On the other hand. 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 a limited liability company2. 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.
presumably you’ve already read this sort of comment from me before.pdf 3. As an added bonus.economically reduces business risk. Or alternatively. and then print this form. Forming the Montana Corporation The actual steps you take to form a Montana state corporation are almost comically simple. you need to file the Application for Reservation of a Business Name and pay a $10 filing fee. http://sos. so I won’t bang the LLC drum again. or any abbreviations thereof. you may not adopt a business name that is the same as or indistinguishable from that of another business. Identify the name you want to use for your new corporation. an S corporation can often save the owners thousands of dollars a year in income or payroll taxes. all of the following names should be acceptable: Acme Explosives Corporation Acme Explosives Incorporated Acme Explosives Company tax benefit (flexibility). (Optional) Check if the corporation name you want is available. Enter your business or investment name onto the lines provided. or web page address. call the Business Services Bureau of the Secretary of State's Office. but burdens you with less red tape. for this form (see Figure 1) is as shown below. a C corporation can often produce tax savings to the business owner because shareholder-employers can get taxfree fringe benefits. Here’s what you do: 1. You can reserve a name for 120 days as you set up your business. For example. Specifically.”) A corporate name must include some reference to its incorporated status by using any of the following: "corporation". Once you have selected a name for your business. Download the Articles of Incorporation Form from the Montana Department of State’s Corporation Forms web site. “Acme Explosives Corporation. That said. (406) 444-3665.gov/BSB/forms/profit/domestic/34Domestic_Profit_Corporation_Articles_of_Incorporation. Copyright © 2007. The URL. To find out whether a business name may be available. 2008 by Fast Easy Incorporation Kits web site . This is not required but may be a good idea if you are not going to immediately file as a business entity. Under state law. "company".mt. 2. (I used the example name. "incorporated". you need to find out whether you can use it. "limited".
you are an incorporator. Be sure to sign your name after printing your name and address. 7. Acme Explosives Co. Accordingly. MT 59620-2801 Copyright © 2007. Acme Explosives Corporation will be authorized to issue 1000 shares of stock. Acme Explosives Inc. 5.Acme Explosives Limited. In this case. they do not have a minimum sale price. 4. In Montana.O. A PO Box is not sufficient. State the number of shares your corporation is authorized to issue. rather than by public shareholders. often members of the same family. Acme Explosives Corporation is acting as a close corporation. 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. you will need to put your name and address as well as your signature on the form. Shares represent ownership interest in the corporation. 6. Provide your name and address to the Secretary of State’s office. Check the box if you are a close corporation. Montana wants to know the name and contact information for a real person within the state of Montana who the state can contact if it has questions or concerns about an corporation’s operation or if legal documents need to be served. State laws permit close corporations to function more informally than regular corporations. In other words. Box 202801 Helena. Be sure to give a contact phone and email. Submit the corporation application After you complete the Articles of Incorporation document mail the document and a check for $70 to: BRAD JOHNSON Secretary of State P. In this case. all shares do not have a par value. enter your name and address information onto the lines that ask for this information. A close corporation is owned and operated by a few individuals. Acme Explosives Corp. 2008 by Fast Easy Incorporation Kits web site . Therefore. Every business corporation must designate in its certificate of incorporation the number of shares which the corporation shall have the authority to issue. Acme Explosives Ltd.
Figure 1: Montana Articles of Incorporation document Copyright © 2007. 2008 by Fast Easy Incorporation Kits web site .
uncertificated stock— in other words. 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. Simply mark the priority filing box and include an additional $20. the board elects officers to the roles of president. As a generalization. your bank will probably also require the board of directors to approve setting up a bank account.00 with your filing fee.Processing lead times vary.such as Copyright © 2007. Montana requires a license of some businesses that operate in the state. You need to issue stock to the shareholders contributing cash or property. At this initial board meeting. Licensing a Business in Montana As you probably know if you’ve worked or run a business in Montana. your corporation legally exists—you still need to perform three other startup tasks: 1. You may have it expedited in one hour for a $100 fee. among other items. 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. You need to hold a stockholders meeting to elect a board of directors in accordance with your corporate by-laws. 2. On the other hand. You may request priority filing of your document. if you’re incorporating principally to minimize your legal liability. 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. The sample corporate by-laws do allow you to use uncertificated stock. 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. Some professions -. Electing Directors and Officers After the secretary of state certifies your corporation—and at this point. Priority filing ensures that your application will be handled within 24 hours of receipt of the document. Issuing Stock. And especially in the case where you are setting up a one-shareholder corporation which you will own and operate. You need to follow your corporate by-laws as to how this process works. Your board of directors needs to hold a board of directors meeting in which. and according to your corporate by-laws. 3. but in general. stock for which you don’t issue stock certificates—is probably easiest. treasurer. you can use uncertificated stock. secretary and so on. vice president. 2008 by Fast Easy Incorporation Kits web site . Tip: If you want to use stock certificates. however.
and dentists -.m. and file any tax returns required for your corporation such as income tax returns and payroll tax returns. to 9:00 p. All you need to have is Internet access and a current Internet browser. Eastern time Fortunately. or pass an IRS Taxpayer Identification Number matching program. Here are the precise steps for completing the online EIN application: Copyright © 2007.m. to 12:00 a. To determine whether you need a professional license. Eastern time Sunday 7:00 p. for your new corporation.Friday 6:00 a. also known as a Federal Tax Identification Number.architects. Getting an EIN for Your New Corporation You will need to get an Employer Identification Number. Until your EIN is added to the permanent records. you can't file an electronic return. Accordingly. chiropractors. or EIN. you also do not need special computer skills to complete the online EIN application. 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. Eastern time Saturday 6:00 a. identifies your business entity and often allows you to do things like open a bank account.m. you do not need special software to complete the online EIN application. contact the Professional and Occupational Licensing Bureau of the state Department of Labor and Industry at (406) 841-2300. 2008 by Fast Easy Incorporation Kits web site . Caution: The IRS takes up to two weeks to make your new EIN part of its permanent records.m. barbers. if you do need an EIN. The online EIN application asks questions and you simply provide the answers by filling in the blanks and checking boxes and buttons.m. every city and county has specific requirements about doing business within its jurisdiction. to 12:30 a. the IRS makes its online EIN application available according to this schedule: Monday . online EIN application.must be licensed. At the time I'm writing this (spring of 2008). An EIN. apply for business licenses. The online EIN application is not available 24 hours a day. In addition. What's more. make an electronic payment.m. Call or visit your county courthouse or city offices to find out what particular requirements exist in your area.
When the online EIN application says "You have chosen Corporations" and asks what type of corporation. Go to the IRS website. click the "Corporations" button. If a word or phrase appears blue and underlined. When prompted by the online EIN application. Go to the bottom of this page and click the “Continue” button. 3. the online EIN application brings you to a page that explains your choice.1. Copyright © 2007. If your new corporation will be treated for tax purposes as an S corporation. also known as a C corporation. 2. you can click on it to see a definition in a new window. Go to the IRS online EIN application web page to begin the EIN online application: https://sa2. When the online EIN application says "You have chosen Corporations" and asks what type of corporation. click the "Corporations" button. click the "Corporations" button. If your new corporation will be treated for tax purposes as a regular corporation. you will click the “Started a New Business” button. Identify the legal and tax structures of your business entity.jsp Scroll to the bottom of the page and click the “Begin Application” button. This step is very important because each type of legal and tax structure has different rules and regulations. 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 . click the "S Corporation" button. After you indicate what type of legal and tax structure you've chosen for the new entity.irs. as well as tax reporting requirements. explain why you are requesting an EIN. Clicking on these definitions will not halt the progress of your application.www4.gov/modiein/individual/index. Click the “Continue” button. Your choices are: § § § § § Started a New Business Hired Employees Banking Purposes Changed Type of Organization Purchased Active Business In general. State why you are requesting an EIN.
etc). if you use a middle initial. you should identify a corporation officer (probably the president or treasurer) as the person the IRS should contact when it has questions. for example. including name and Social Security or Individual Tax Identification Number. If your address does not fit in 35 characters. You will also be required to provide a phone number. If you do. 6. Click “Continue” after you identify the type of primary member or principal officer. You need to designate a contact person--or what the online EIN application calls a principal officer.4. 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. The IRS considers the contact person to be the individual or business responsible for tax matters. If the IRS sends a letter to the corporation. Click the “Continue” button. For instance. suite numbers. 5. if necessary. the county and state where the corporation is Copyright © 2007. 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. they send the letter to the corporation in care of the person. This address must be a U. apartment numbers. please make sure you provide the most essential address information (i. the person may be able to first obtain an Individual Tax Identification Number by completing a Form W-7. you will be taken to a page to provide that address. The IRS also wants information about the principal officer. Provide legal and trade name information about your corporation. When prompted by the online EIN application. the trade name (if any). In a small corporation. address and may not be a PO box. Don't use any punctuation other than a hyphen (-) and ampersand (&) in the name.e.. You need to provide a physical address of your corporation. Identify and describe a contact person of the corporation. Provide the corporation's business location. you need to provide the name of the corporation. Application for IRS Individual Taxpayer Identification Number form. do not place a period after that initial. Note: If the contact person is a nonresident alien and therefore doesn't have a Social Security Number. Note: IRS systems only allow 35 characters on the street address line. owner or general partner. Do not use any punctuation except for a hyphen or a back slash. 2008 by Fast Easy Incorporation Kits web site .S.
Use the pull-down menu to select a month and year. This is typically the same state as the corporation's physical address. The name you provide as the legal name of your corporation should match the articles of organization or articles of incorporation. quarterly federal excise tax returns. if any. again when prompted. the name may not contain an ending such as LLC. However. the answer will be “No” to all four questions. identify the state where the articles of organization or articles of incorporation were filed. Indicate whether the corporation is subject to special federal excise taxes. 2008 by Fast Easy Incorporation Kits web site . If none of the categories fit. choose a category that best describes your business. the state where the articles of organization or formation are filed. you will need to provide the corporation's start date. click on "Other" and then click the “Continue” button. You can also provide a trade name. This is the date on which the entity began doing business or will begin doing business. tobacco and firearms. PLLC. and the corporation start date. and alcohol. After you provide the corporation name. 8. For most people. The online EIN application automatically fills in the county and state based on the physical address previously entered. If you use a trade name. gambling. If you aren’t sure what a category includes. Corp. Again. LC. address and start date information. 7. Finally. the online EIN application allows only two special punctuation characters: hyphen (-) and ampersand (&). you should verify that both of these bits of information are correct. Click the “Continue” button. Copyright © 2007.located. Click the “Continue” button. State what your corporation does. however. When prompted. or Inc. When prompted. A trade name or "doing business as" name is another name under which the business or individual operates. the online EIN application asks a series of questions about vehicles. Read the questions and answer them. you can click on that category for a further explanation.
start a new application.gov. If you choose to receive it online.If you choose “Other” you will be taken to a second page of options. If none of these options fit. If you choose to receive the letter by mail. after you determine the information is correct. Then. Note.adobe. click on the “Other” button on this page and then type in what your corporation will do. that you will need to have the Adobe Reader program installed on your computer. 9. Verify Your Information. Click the “Continue” button. If any of the information is incorrect. "Application for an Employer Identification Number. Then click the “Continue” button. and then mail or fax the completed SS-4 to the appropriate address or fax number. This process can take up to two minutes. Tell the assistor you received an EIN from the Internet but can't remember it. complete it. the IRS will send it to the mailing address you provided. This may take up to four weeks. click the “Submit” button to receive your EIN.com/products/acrobat/readstep2. For example." from www. Print the summary page and check the information for errors. The last page of the online EIN application summarizes your information. you can download a paper copy of the Form SS-4. State How You Would Like to Receive Your EIN Confirmation Letter. This program can be downloaded for free from: http://www. Copyright © 2007. the easiest way to get an EIN number is through the interview-style. Applying for a New EIN using the Paper SS-4 Form As mentioned. the IRS also provides other procedures for obtaining an EIN. However. though. If you forget your EIN number. you will be able to view the letter immediately and it will not be mailed to you. 10. online EIN application described in the preceding paragraphs. call (800) 829-4933 and select EIN from the list of options in order to speak with an IRS employee.irs.html. Note: The unique prefixes 20 and 26 identify the EIN as a number issued via the Internet. You can receive your EIN confirmation letter online or by mail. 2008 by Fast Easy Incorporation Kits web site .
If you want an S election to be effective as of January 1.10:00 p. The hours of operation are 7:00 a. the web address for the SS-4 form is: http://www.m. In a nutshell. estates of U. To make the election to be treated as an S corporation. Electing S Corporation Treatment for a Corporation A corporation may elect to be treated as a Subchapter S corporation. California.m. you file Form 2553 with the Internal Revenue Service within 75 days from the start of the year. you need to file the election by March 15. (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. citizens or permanent residents. (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).irs.gov web site and fill out the form as best you can before calling the number just given. Idaho.gov/pub/irs-pdf/iss4. 2008 by Fast Easy Incorporation Kits web site . Monday through Friday. a corporation must meet certain eligibility requirements.pdf The web address for the SS-4 form instructions is: http://www.S. however. S corporations often save the small business owner significant amounts of federal corporation income tax and payroll taxes. As compared to a regular corporation. In order to become an S corporation. and certain trusts and charities. New Mexico. Texas. Louisiana. If you want an S election to be effective as of June 1 (because that’s the Copyright © 2007. Nevada.pdf Applying for a New EIN by Telephone You can also obtain an EIN immediately by calling (800) 829-4933.gov/pub/irs-pdf/fss4. you really should retrieve a copy of the SS-4 form and form instructions from the www. local time.At the time I'm writing this document. Washington and Wisconsin) must consent to the S election. in other words. Before calling for an EIN.irs. called a C corporation. also known as an S corporation.S. . and (4) shareholders must generally be either U. citizens or permanent residents.irs. (1) all shareholders (and shareholder spouses residing in community property states like Arizona.
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.gov/pub/irs-pdf/f2553.com/taxationofcorporations.com and from the http://www. no federal corporate income tax.pdf It's also not a bad idea. many tax traps exist for the unwary and the careless. Copyright © 2007.gov web site. S corporations offer their owners and shareholder-employees some wonderful tax planning opportunities.irs. to also grab an up-to-date copy of the form instructions.irs. the precise web address for the 2553 form is: http://www.pdf 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. To complete and file the IRS Form 2553. Get the IRS 2553 form from the www. 4 You can get basic tax information on S corporations by visiting www.gov/pub/irs-pdf/i2553. Download the election forms. The precise web address for the 2553 instructions at the time I'm writing this is: http://www. At the time I'm writing this.4 However.fasteasyincorporationkits. if you're going to grab an up-to-date copy of the form.3 Caution: I want to caution you one last time about making the S election: Before you elect. and (sometimes) substantial payroll tax savings.htm. 2008 by Fast Easy Incorporation Kits web site . you need to file the election by August 15. Enough said.irs.incorporation date and the point at which the corporation’s first year states). follow these steps: 1. including pass-through of net operating losses.SCorporationsExplained.
2008 by Fast Easy Incorporation Kits web site .Figure 2: Page 1 of an example completed 2553 Form. Copyright © 2007.
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. S corporation fiscal years can end on December 31. Note. Enter the effective date of your S election into Box E. 2008 by Fast Easy Incorporation Kits web site . October or November—only complicates your tax accounting and produces no real benefit for you. Accordingly. This tells the IRS who to call if they have questions about the S election. 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. Having a non-calendar fiscal year—an accounting year that ends in September. make an S election effective as of the start of the year (typically January 1).2. that the effective date can not be more than 75 days before the date on which you’re making the election (typically March 15). However. however. and the employer identification number. or November. Typically. Copyright © 2007. 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.” you enter the name of the corporation. the effective date of the S election is the incorporation date. Tip: You can elect Subchapter S status for a corporation that’s previously operated as a regular C corporation. When corporations become S corporations after being a C corporation. At the very top of the form (see Figure 2). 3. 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. Specify that the S corporation’s tax year will end on December 31. however. almost certainly want to mark the Calendar Year option in box F. Enter your name and telephone information into Box H. You shouldn't need to use this space if you're filing the election on time. you should not do this using a do-it-yourself approach. in the block labeled “Type Or Print. address. Note: In the area beneath box H. Note: If you think you want a non-calendar fiscal year end. October. or on the last day of September. and EIN information. the street address. You should confer with a knowledgeable tax practitioner. you shouldn’t make the S election yourself. 4. the new S corporation may be subject to special taxes and also be subject to several accounting rules too complicated for a doit-yourselfer. Provide the corporation’s name. the IRS provides space for you to explain why you're filing a late 2553 election. city and state. you probably. You can also. however. Instead. 5.
and N to name each shareholder in the new S corporation. 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. L. The IRS typically has special procedures for making these late elections. 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. If you've already goofed up the S election deadline. Sign the S election Form.) As mentioned earlier in this ebook. Copyright © 2007. 7. You need to provide each shareholder name and address in column J. certified public accountant or enrolled agent who specializes in S corporations to fix your election. California. Wisconsin and sometimes Alaska and Puerto Rico). by the way. Nevada. (This should be December 31 in the case of most individuals. Texas. Note that in the case of non-shareholder spouse. enter the month and day that each shareholder’s tax year years. if any of your shareholders resides in a community property state (Arizona. you probably want to pay a lawyer. 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. Name and get signatures from each shareholder and. On page 2 of the 2553 form (see Figure 3). Louisiana. is that you not try to file a late election yourself. Finally. Note: You won't need to worry about the third page of the 2553 form (see Figure 4). M. 6. You must use column L to identify the number of shares that each shareholder holds.My suggestion. 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. 2008 by Fast Easy Incorporation Kits web site . You need to enter each shareholder’s social security number into column M. use columns J. However. if needed. shareholder spouse. K. You need to have each shareholder sign and date the S election in column K. Washington. and you want to have someone who understands the most current special procedures do the election. If owners don’t hold shares but only percentage interests. Idaho. New Mexico. you can enter those percentages into column L.
Figure 3: Page 2 of an example completed 2553 Form. Copyright © 2007. 2008 by Fast Easy Incorporation Kits web site .
Copyright © 2007.Figure 4: Page 3 of an example completed 2553 Form. 2008 by Fast Easy Incorporation Kits web site .
California. Virginia. Ohio. Arizona. South Carolina. Wisconsin Alabama. 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. Minnesota. Illinois. Iowa. you can see which mailing address or fax number you can use for your state using the table below. 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. New Hampshire. I want to share a handful of quick comments: 1. North Dakota. South Dakota. Alaska. Maine. Rhode Island. Certified mail with a delivery receipt isn't a bad idea. Louisiana. Oklahoma. Missouri. Colorado. Oregon. I used to suggest that people mail the 2553 form using certified mail with a delivery receipt. Michigan. Hawaii. Vermont. West Virginia. Fax or Mail the 2553 Form to make the federal S election. but nowadays. office or agency address is located in state of: Connecticut. Texas.8. Wyoming Then use the following mailing address or fax number to submit 2553 Department of Treasury Internal Revenue Service Center Cincinnati. Nebraska. the IRS is so forgiving about late S elections that it's probably just as easy to fax the completed 2553 form. Tennessee. Indiana. Kentucky. Nevada. Idaho. Massachusetts. Washington. OH 45999 Fax: (859) 669-5748 Department of Treasury Internal Revenue Service Center Ogden. Maryland. Kansas. cross your fingers and then make a late election via mail if there's a deadline problem. New Jersey. Delaware. attempt to immediately resolve any problems by telephoning the Secretary of State’s office or the local IRS office. if you act immediately you can often still fix a problem before the election deadlines expire. New Mexico. 2008 by Fast Easy Incorporation Kits web site . North Carolina. Especially with the IRS. Mississippi. If your principal business. 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. In any case. Arkansas. UT 84201 Fax: (801)-620-7116 Some Closing Caveats and Comments Before I end this short booklet. Florida. Georgia. Copyright © 2007. Montana. Utah. District of Columbia. Pennsylvania. New York.
S corporations may be able to use a non-calendar year. can be several thousand dollars a year. for example. 5. 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. before you finish setting up your corporation: In general. you often can support a salary that allows you to save on taxes. 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. Most of the time. 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. you should probably assume that the IRS will challenge an unreasonably low or high salary. or “fiscal. C corporations.S. 2008 by Fast Easy Incorporation Kits web site .” year that ends on the last day of any month of the year. 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.000 in payroll taxes. county and city government agencies. My strong suggestion to my clients is that they collect independent salary data to support what their S corporation pays shareholderemployees in wages. may often use a non-calendar year for their accounting. give up on the “do-it-yourself” approach and. I mentioned this before. Copyright © 2007. Don’t put assets that may appreciate (such as real estate) into a corporation without consulting a knowledgeable tax attorney or a CPA. however. if your corporation begins doing business in. But if you’re having trouble. enlist the services of a local professional. Montana. If you can’t resolve the problems yourself. 7. 3. a smart person who’s careful can work through the paperwork themselves. instead. 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. say. Note that with good salary data. In other words. 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. 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). In fact. Corporation tax returns for both C and S corporations are due 75 days after the end of the tax year. The “cost” of fouling up an S election. 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 example. you will need a certified public accountant or enrolled agent to prepare a corporate tax return for your new corporation. a regular C corporation can often have an accounting. such as from the U. 4. Something you should know now.2. Government’s Bureau of Labor Statistics. 6. For corporations that use a calendar year ending December 31.
2008 by Fast Easy Incorporation Kits web site .Appendix A Sample Corporate By-laws Copyright © 2007.
unless otherwise prescribed by the articles of incorporation or law. Offices.m. until a quorum will be present or represented. 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. 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. 2. 2. Quorum. 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. present in person or represented by proxy. Such request of the Board or shareholders will state the purpose or purposes of the proposed meeting. Special Meetings. Special meetings of the shareholders.4. 2. Shareholder Meetings. however. If.Bylaws of ______________________________________________ Formed under the laws of the state of _______________________ (the “Company”) 1. it will in addition state the purpose or purposes for which said meeting is called. The presence at a shareholders meeting of the holders. 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.2. If said notice is for a shareholders meeting other than an annual meeting. 2. Annual Meetings. Annual meetings of shareholders will be held at 10:00 a.1. Notices. 2008 by Fast Easy Incorporation Kits web site . 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. both within and without the state in which it is incorporated. 2. have such other offices and places of business. 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. At such reconvened meeting at which a quorum Copyright © 2007. 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. will have power to adjourn the meeting from time to time. such quorum will not be present or represented at any meeting of the shareholders. the shareholders entitled to vote thereat.3. without notice other than announcement at the meeting. for any purpose or purposes. in addition to its registered office in the state in which it is incorporated. Written notice of each shareholders meeting stating the place. The Company may. 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. and the business transacted at such meeting will be limited to the matters so stated in said notice and any matters reasonably related thereto.
Voting Lists. Voting of Shares. 3. All directors will be elected by the shareholders at each annual shareholders meeting.5. The list will also be produced and kept at the time and place of the meeting during the whole time thereof.2. will be signed by all of the holders of outstanding stock entitled to vote thereon.5. The officer who has charge of the stock ledger of the Company will prepare. Number. 2. by express provision of the articles of incorporation or law. during ordinary business hours for a period of at least ten days prior to the meeting.will be present or represented. without prior notice and without a vote. and may be inspected by any shareholder who is present. a different vote is required.5. at any meeting of shareholders may be taken without a meeting. Election. No proxy will be voted on after eleven months from its date. at least ten days before every meeting of shareholders. a new notice of said meeting will be given to each shareholder entitled to vote at such meeting. for any purpose germane to the meeting. Any action required to be taken. The business of the Company will be managed by or under the direction of the Board. 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.5. 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. in which case such express provision will govern and control the decision of such question. the vote of the holders. Directors need not be shareholders or residents of the state in which the Company is incorporated. When a quorum is present at any meeting. unless the question is one upon which. 2. 3. The number of directors constituting the Board will never be less than one and will be determined by resolution of the Board. 3. 3. any business may be transacted which might have been transacted at the meeting as originally notified.5.4. Directors. or which may be taken. Plurality. 2. 2. Votes Per Share. Such list will be open to the examination of any shareholder.184.108.40.206. if a consent in writing. 2. 2. Unless otherwise provided in the articles of incorporation. Copyright © 2007.1.3. Purpose. unless the proxy provides for a longer period. If any such adjournment is for more than 30 days. 2008 by Fast Easy Incorporation Kits web site . or if after the adjournment a new record date is fixed for the reconvened meeting. setting forth the action so taken. at the registered office of the Company. the articles of incorporation or law directed or required to be exercised or done by the shareholders. Consents in Lieu of Meeting. present in person or represented by proxy. 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. Proxies.2. which may exercise all such power of the Company and do all such lawful acts and things as are not by these bylaws.
Quorum. Unless otherwise restricted by these bylaws or the articles of incorporation. Copyright © 2007. Annual Meeting. as the case may be. 2008 by Fast Easy Incorporation Kits web site . No such payment will preclude any director from serving the Company in any other capacity and receiving compensation therefore. The president or secretary will call a special meeting of the Board on the written request of two (b) directors or the sole director. as the case may be. The Board will meet as soon as practicable after the adjournment of each annual shareholders meeting. 3. 4. 3. Regularly scheduled. 4. A majority of the directors will constitute a quorum for the transaction of business at any meeting of the Board. Special Meetings of the Board may be called by the president on one day’s notice to each director. any director or the entire Board may be removed. 4. Vacancies in the Board may be filled by a majority vote of the remaining directors. with or without cause.5. the directors present thereat may adjourn the meeting from time to time. 4. Special Meetings. If a quorum will not be present at any meeting. the Board will have the authority to fix the compensation of directors. though less than a quorum. if any. Members of committees of the Board may be allowed like compensation for attending committee meetings.6.4. 4. Removal. Regular Meetings. without notice other than announcement at the meeting. 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. any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting. 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. consent thereto in writing. 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. by a majority vote of the shares entitled to vote at an election of directors. either personally or by mail or telegram.2.4. Unless otherwise restricted by these bylaws or the articles of incorporation.3. No notice to the directors will be necessary legally to convene this meeting. Consent in Lieu of Meeting. 4. Vacancies. Any director so elected by the Board will have a term terminating with the next election of one or more directors by the shareholders.3. Unless otherwise restricted by these bylaws or the articles of incorporation. The directors may be reimbursed their expenses. A director elected to fill a vacancy will be elected for the unexpired term of his predecessor. except as may be otherwise expressly provided by the articles of incorporation or law. provided a quorum is present. Plurality. Meetings of the Board.1. No more than two (b) newly-created directorships may be filled by the Board between any two (b) successive annual shareholders meetings.5. Compensation. and the writing or writings are filed with the minutes of proceedings of the Board or committee. if all members of the Board or committee.
the president will preside at all meetings of the shareholders and the Board. The president will execute bonds.3.1. Available Powers. 2008 by Fast Easy Incorporation Kits web site . President. to the extent provided in the resolution of the Board establishing such committee and as limited by these bylaws. cause the dissolution of the Company or a revocation of such a dissolution.1. unless the resolution establishing such committee. The president will be the chief executive officer of the Company. Chairman of the Board. Vice Presidents. 5. then in the order of their election) will perform the duties of the president. 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.1. 6. 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: 6.2.5. 6. amend or repeal any resolution of the Board which provides that it will not be so amendable or repealable. or. 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. fill a vacancy in the Board or any committee thereof. these bylaws or the articles of incorporation expressly so provide. each committee to consist of one or more of the directors. The chairman of the Board will preside at all meetings of the shareholders and the Board. 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. 5. 6. Unavailable Powers. In the absence of the chairman of the Board or in the event of his inability or refusal to act. Committees of Directors. fix the compensation of any member of such committee.3. 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. Copyright © 2007. name or dissolve one or more committees. adopt a plan of merger or consolidation. lease or exchange of all or substantially all of the Company’s property and assets other than in the ordinary course of business. 5.2. recommend to the shareholders the sale. Each committee will keep regular minutes of its meetings and report the same to the Board when required. Elected Officers. Establishment. or if there be no such determination. and may authorize the seal of the Company to be affixed to all papers which may require it. the articles of incorporation and law. the vice president (or in the event there be more than one vice president. declare a dividend or authorize the issuance of stock.1. Officers.1. deeds of trust and other contracts requiring a seal under the seal of the Company. amend the bylaws of the Company. 6. No committee of the Board will have the power or authority to amend the articles of incorporation.1. The Board may by resolution establish. the vice presidents in the order determined by the Board. The Board will elect a president and a secretary (collectively. Any such committee.
Such divisional officers will be appointed by. if there be more than one. Treasurer.4. then in the order of their election or appointment) will. 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.6. at its regular meetings. 6.8.5. 2008 by Fast Easy Incorporation Kits web site . the assistant treasurers in the order determined by the Board (or if there be no such determination. assistant secretaries. resignation. secretary. 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. vouchers. and when so affixed. 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. Assistant Treasurers. Each division of the Company.1. 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. The secretary will attend all meetings of the shareholders.1. assistant treasurers and other assistant officers.7. or when the Board so requires. Divisional Officers. in the absence of the secretary or in the event of his inability or refusal to act. 6. it may be attested by his signature or by the signature of such assistant secretary. will have all the powers of and be subject to all the restrictions upon the president. papers. The assistant secretary or. money and other property of whatever kind in his possession or under his control belonging to the Company.1. if there be more than one. Secretary. if any. 6. then in the order of their election or appointment) will. taking proper vouchers for such disbursements. The assistant treasurer or. 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.1. treasurer or controller and one or more vice presidents.and when so acting. and will render to the president or to the Board. in the absence of the treasurer or in the event of his inability or refusal to act. may have a president.1. report to and serve at the pleasure of the Board and such other officers that the Board Copyright © 2007. retirement or removal from office of all books. He will disburse the funds of the Company as may be ordered by the Board. 6. 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. Any number of such offices may be held by the same person. He will give. The treasurer will have custody of the corporate funds and securities. or cause to be given. 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. an account of all his transactions as treasurer and of the financial condition of the Company. Assistant Secretaries. 6. 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. If required by the Board. 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. the assistant secretaries in the order determined by the Board (or if there be no such determination.
Copyright © 2007.1.2. 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. disqualification. unless these bylaws or the articles of incorporation otherwise provide. possessing authority over or responsibility for any functions of the Board will be elected officers. 2008 by Fast Easy Incorporation Kits web site . Appointed Officers. and the titles and duties of such appointed officers may be as described in Section 6. 6. The Board may also appoint or delegate the power to appoint such other officers. 6.5. certifying the number of shares owned by him. provided that. Officers.4. Any number of offices may be held by the same person. a statement of the powers. such as the chairman of the Board.1 for elected officers. 6. provided that the Required Officers and any other officer. Salaries. Officers need not be shareholders or residents of the state in which the Company is incorporated. where so authorized.2. 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. participating. and (b) the Company will furnish a copy of such statement without charge to each shareholder upon request therefore. designations. The Board will also fill any vacancy in an elected office. resignation or removal from office. optional or other special rights of each class of stock or series thereof and the qualifications. Entitlement to Certificates. to the extent allowed by law.3. If the Company will be authorized to issue more than one class of capital stock or more than one series of any class. Every holder of the capital stock of the Company. 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. assistant officers and agents or delegate the power to do the same. 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. 6. limitations or restrictions of such preferences and/or rights will. Multiple. 7. assistant officers and agents and may also remove such officers. 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. Election. Vacancies.may place in authority over them. The salaries of elected officers will be set by the Board. preferences and relative. 7. retirement. prepared in accordance with applicable law. Shareholder and Director Officeholders. Share Certificates. such as the chairman of the Board. as it will from time to time deem necessary. Multiple Classes of Stock. routinely possessing authority over or responsibility for any functions of the Board must be directors. unless the Board will by resolution provide that such class or series of stock will be uncertificated. 7. will be entitled to have a certificate. in lieu of such statement. 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.
5. at the Board’s election. if any. to express consent to corporate action in writing without a meeting. an assistant treasurer.3. When authorizing such issue of a new certificate or certificates. in advance. or the legal representative thereof. to receive payment of any dividend or other distribution or allotment of any rights. the secretary or an assistant secretary of the Company. Upon surrender to the Company or to its transfer agent. the Board may. Lost Certificates. the signatures of the officers of the Company may be facsimiles. stolen or destroyed certificate or certificates. Fixing Record Date. of a certificate for shares duly endorsed or accompanied by proper evidence of succession. 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. A record date validly fixed for any meeting of shareholders will be valid for any adjournment of said meeting and will. a record date. be valid for any reconvenings and readjournments of said meeting made no later than 90 days after said record date. or his legal representative. 7. Where a certificate is countersigned by either (a) a transfer agent other than the Company or any employee thereof. or (b) a registrar other than the Company or any employee thereof. the Board may fix. stolen or destroyed certificate or certificates. conversion or exchange of stock or to effect any other lawful action. stolen or destroyed certificate or certificates. Registered Shareholders. 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. 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.4. 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. 7.7. cancel the old certificate and record the transaction upon its books. the Company will be obligated to issue a new certificate to the person entitled thereto. and (b) the treasurer. except as otherwise required by law.7. stolen or destroyed upon the making of an affidavit of that fact by the owner of the allegedly lost. require the owner of such lost. Transfer of Stock. to exercise any rights in respect of any change. 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. 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. 7. 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. 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. 2008 by Fast Easy Incorporation Kits web site . Copyright © 2007. 7. the certificate may be issued by the Company with the same effect as if such officer held such office on the date of issue. Signatures.6. 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. whether or not it will have express or other notice thereof.
said meetings will be held at the registered office of the Company. the articles of incorporation or law applicable to the Company. return receipt requested. signed before or after the date of such waiver by the person or persons entitled to said notice. cable.1. Reserves. 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. 2008 by Fast Easy Incorporation Kits web site . Dividends. prepaid. or (ii) the time verification is made of delivery.8. or (d) facsimile. 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. the articles of incorporation or these bylaws. may be declared by the Board at any meeting thereof. and such participation in a meeting so held will constitute presence in person at the meeting.5. a written waiver of such notice. Place of Meetings. 8.7. in its absolute discretion. the articles of incorporation or law. (2) on the earlier of (i) the fourth day after deposit.4. or (3) when received. it will not be construed to mean personal notice. If no such place is so designated. Copyright © 2007. a full and clear statement of the business and condition of the Company. Attendance Via Communications Equipment. telex or telegram transmission.6. 8. the articles of incorporation or law.2. if given pursuant to clause (d) of the previous sentence. prepaid. 8. for equalizing dividends. Whenever any notice is required to be given under law. within or without the state in which the Company is incorporated. notice is required to be given to any person. if given pursuant to clauses (b) or (c) of the previous sentence. under these bylaws. determines proper as a reserve or reserves to meet contingencies.3. The Board will present at each annual meeting of shareholders. 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. if given pursuant to clause (a) of the previous sentence. Means of Giving Notice. Whenever. (c) deposit with a recognized courier company. paid in cash. as will be designated from time to time by the Board and stated in the notices thereof. will be deemed equivalent to such required notice. property or shares of capital stock and as may be limited by these bylaws. All shareholders and directors meetings will be held at such place or places. 8. (b) deposit in the United States mail. 8. Any such notice will be deemed to be received (1) when delivered. and at any special meeting of shareholders when called for by vote of the shareholders. 8. Reports to Shareholders. 8. Miscellaneous. return receipt requested. Unless otherwise restricted by these bylaws. Dividends on the capital stock of the Company. and the Board may modify or abolish any such reserve in the manner in which it was created. 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. but such notice may be given by (a) personal delivery. Waiver of Notice. members of the Board.
8. repealed or replaced by the Board and by the shareholders. These bylaws may be adopted. 8. affixed or otherwise reproduced. or at any special meeting of the shareholders or of the Board if notice of such adoption. repeal or replacement is contained in the notice of such special meeting.10. Seal. unless and to the extent the power of either is limited by the articles of incorporation. The seal may be used by causing it or a facsimile thereof to be impressed. alteration. END Copyright © 2007. The fiscal year of the Company will be fixed by resolution of the Board. 8. amended.11. altered. amendment. 2008 by Fast Easy Incorporation Kits web site . at any annual shareholders meeting or annual or regular meeting of the Board. 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. Checks.9. Amendments. 8.8. The seal of the Company will be in such form as may from time to time be adopted by the Board. Fiscal Year.
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