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The
forming and operating of the corporation
Stocks
and shares
Forms
Of Businesses & Where to Incorporate
What
is an assumed name?
An
assumed name is a fictitious name or any other name under
which the corporation operates. The assumed name is usually used to differentiate the different
products or services that the corporation offers. An assumed name is an alias name for the same corporation.
What
are the legal limitations when choosing a name for the corporation?
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The
word or respective abbreviation for corporation (corp.),
incorporated (inc.) or limited (Ltd) must be included
in the corporate name.
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A
Corporation cannot choose the name of an already exiting
corporation.
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Do not use words that may mislead people to think
that the corporation has anything to do with the government
or the US or words that are against public policy.
For example, one cannot just use their last name followed
by an abbreviation for corporation. The Department
of State requires that you add your first name.
What
are articles of incorporation?
It
is the document that is prepared when individuals decide
to form a corporation. It contains pertinent information
about the corporation such as the name, length of intended
operation, the nature and purpose of the business and the
number of shares that will be issued. This document is sent to the appropriate department
of the state in which the company will be incorporated.
What
are bylaws?
They
are the set of rules that regulates the operation of the
corporation. In essence they are the rules that the corporation
has for its stakeholders, officers and directors. When bylaws are amended at the directors meeting,
an annotation should be made in the minutes and placed in
the corporate records book.
What
is the certificate of incorporation?
The
certificate of incorporation is sometimes referred to as
a charter or articles of incorporation. It is the document issued by the state as proof that
a corporation is legitimate or valid and has met all state
requirements. However in some states, it is considered as
the document that is filed in order to incorporate your
business.
Who
is the Incorporator?
The
individual who actually files the articles of incorporation.
Once the company has been incorporated, the duties of the
incorporator officially end.
Who
are the directors?
Individuals
chosen by the shareholders to oversee the business affairs
of the corporation.
What
is the purpose of the board of directors?
It
is the committee that oversees the business affairs of the
corporation. The
board members are not responsible for the daily operations
of the corporation, but they do approve all important business
decisions. They
hire officers to manage the corporation.
Who
are the officers?
Officers
are hired by directors, to manage the day-to-day operations
of the business. In small corporations the owners sometimes
act as the officers. A Corporation normally has 4 officers,
namely, the president, vice-president, secretary & treasurer.
What
is the purpose of annual meetings?
Annual
meetings are held once a year in order to inform shareholders
of the progress of the company, as they are not involved
in the day-to-day activities of the company. Officers and directors normally serve a one-year
term and are therefore re-elected at annual meetings.
Who
are stockholders?
Stockholders
otherwise know as shareholders or stakeholders are individuals
who invest money into the company in exchange for future
dividends. In small corporations shareholders are the individuals
who actually start up and run the business.
What
is a dividend?
It
is the payment that shareholders receive at the end of each
quarter, from the corporation, usually in the form of cash
or stock. The amount of dividends that shareholders receive depends on
the amount of profit that the corporation makes. Thus, it may not be a regular payment.
What
are issued shares?
The
number of shares distributed to the shareholders. These are the only shares that are counted for ownership purposes.
What
are authorized shares?
The
maximum number of shares that the board of directors is
permitted to issue to shareholders. The board of directors does not necessarily have
to issue all the shares at the same time. It can be done periodically.
What
is the difference between issued shares and authorized shares?
Shares
can be authorized but not issued. These shares are referred to as authorized but un-issued
shares. Un-issued
shares are not considered for ownership purposes. Issued shares are those, which are actually distributed
to shareholders.
What
is the minimum amount of stocks required for a corporation
to exist?
A
company needs at least one shareholder and one share of
stock in order to be considered a legitimate corporation.
What
is meant by the term Par Value?
Par
value is the purchase price of the stock. (When the stock
is bought directly from the corporation), or the amount
of money the corporation receives when stock is issued to
shareholders.
What
is the market price?
It
is the amount that is paid for stock sold on the open market.
What
is meant by no Par Value Stock?
This
term refers to stocks that do not have a fixed price yet.
The directors will actually determine the price of stock,
when they are issued to the stockholder.
Is
it necessary for stocks to have par value?
No,
each time stock is issued directors will decide how much
stocks are worth.
What
is the difference between Sole Proprietorship & Partnership?
The
major difference between both forms of businesses is that
a sole proprietorship has one owner and the partnership
involves two or more people.
How
do the sole proprietorship and the partnership differ from
the corporation?
In
both the sole proprietorship and partnership, the owners
are liable for business debts however, in corporations,
the owner is not liable for debt seeing that the corporation
is a separate legal entity.
What
is the difference between the "S" corporation
and "C" corporation?
The
"S" corporation is a corporation that chooses
a special tax treatment wherein the corporation is not responsible
for its own taxes. It is the duty of the shareholders to pay necessary
income taxes if the "S" corporation makes a profit, or on
the contrary, receive a tax deduction if the company losses
money. However,
in the "C" corporation, the corporation itself
is liable to pay its own income taxes. (Contact your accountant to see which type of corporation
is most suitable for your business.)
Can
the Owner of the Corporation be an employee?
Yes,
the owner has to be an officer in the corporation and is
therefore eligible to receive employee benefit such as health
& life insurance and pension plans.
Is
it better for companies to incorporate out of state?
Laws
that regulate the incorporation process vary from state
to state. However, although it may seem cheaper or easier
to incorporate in certain states such as Delaware, in the
long run it is actually cheaper to incorporate the company
in the state in which it will operate or do business. When
companies operate out of state they are subject to double
taxation (paying taxes in state of incorporation and state
where business operation takes place) and filing fees in
order to qualify to operate out of state. (Please discuss this matter with your lawyer or accountant
before making your decision.)
Who
is a Registered Agent?
A
registered agent is an individual who ensures that the corporation
has a representative in the state in which the company has
been incorporated. The main responsibility of the registered
agent is to receive and forward important legal documents
for the corporation. Companies that do not operate in the
state in which they were incorporated normally use registered
agent service companies as their registered agent.
The
only stipulation is that the registered agent's address
cannot be a P.O. Box address. The agent should have a valid
street address.
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