Thinking of starting a corporation? This checklist gives you several issues to think about as you launch your new entity.
A corporation exists because a state grants the entity a charter to exist following the filing of Articles of Incorporation (or in the case of Delaware a Certificate of Incorporation). For example, the Virginia Code states “When the certificate of incorporation is effective, the corporate existence shall begin.”
State governments require certain minimum information to file for the creation of a corporation, such as the name, the number of shares of capital stock to be authorized, the registered agent and registered office. Yet, it is important to understand that founders have many options regarding other provisions that may be included in the filings as well. This information is optional, but could be important.
If you are forming a corporation, here are some items to consider:
- Decide upon a name. Keep in mind that the state law provisions that exist are intended to prevent confusion on names, so you need to check for other similarly named entities. A stock corporation in Virginia must include one of the following words: “company,” “corporation,” incorporated,” “limited,” or one of the following abbreviations: “Co.,” “Corp.,” “Inc.,” or “Ltd.” Other statutory provision might also govern the selection of a name, such as if a corporation by members of certain professions.
- Select the state of incorporation. Although Delaware is a common state of incorporation for entities that intend to seek capital financing, Virginia is likely fine for almost all companies.
- Determine where the principal place of business for the corporation is to be located.
- Review optional provisions for the initial filing, such as:
- Names and addresses of initial directors
- A provision defining or denying preemptive rights
- Any provision not inconsistent with the law (such as stating a purpose for the entity or provisions regarding the management of the corporation)
- Determine who will be the “incorporator” and file the appropriate form with the state office.
- If no board of directors is set forth in the Articles of Incorporation, the incorporator will need to appoint the initial board of directors.
- Identify the initial board of directors.
- Following the issuance of the Certificate of Incorporation, organize the corporation by holding the organizational meeting of the Board of Directors.
- Adopt bylaws.
- Elect initial officers.
- Approve a form of the stock certificate, with the appropriate legend.
- Prepare initial stock subscription agreement and adopt the agreement.
- Adopt a corporation seal and adopt the fiscal year.
- Ratify the acts of the incorporator.
- Determine whether the corporation and its owners will select Subchapter S tax status.
- Prepare a stock ledger.
- Determine if the corporation will need to qualify to do business in other states.
Several significant issues remain following this initial step. Consider whether the corporation needs any particular local business licenses. Determine whether a stockholders’ agreement is appropriate. Filing the Articles of Incorporation and obtaining a charter to exist are only the beginning.
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