Corporate Requirements After Incorporation

An important first step after receiving your company's incorporation documents is to hold an initial meeting to appoint officer and directors, as well as to issue shares of stock.

Directors typically operate as part of a Board, making up the governing body elected by shareholders. They are responsible for the management of a corporation's business and affairs. Officers consist of roles such as President, Vice President, Treasurer, and Secretary. They are responsible for carrying out the Board's policies and for making day-to-day decisions. Shareholders are included in annual meetings and must approve any major company decisions, such as issuing loans, purchasing real estate, and issuing additional shares.

It is important to hold annual meetings with shareholders and maintain minutes of those meetings. In general, maintaining a thorough corporate record means recording all meeting minutes, using a share ledger, and saving copies of all filed documents (formation, amendments, annual reports, etc.).  Make sure to maintain good standing with your state and registered agent by filing all annual reports and paying necessary taxes and fees on time. 

How Will Incorporating Benefit You?

There are many benefits to incorporating. In order to determine whether or not incorporating is the best option for you and your business entity we advise that you consult a trusted accountant or attorney for financial and legal advice.  Incorporating can be a big milestone in the life of your business and American Incorporators can help every step of the way!

These are our top three reasons for incorporating:

1) It offers liability protection

By forming an LLC or Corporation you create a barrier between your personal assets and your company assets, should your company every be sued. In this case you can protect your personal assets from being seized.  

2) It lends a sense of legitimacy

Forming a legal business entity also lends a sense of legitimacy to your venture.  This can help attract investors, clients, and vendors.  People tend to have more faith in a company with Inc. or LLC at the end of its name.

3) It allows for longevity

If the initial owner dies, the business entity continues and shares can be passed on to others. Or if the owner wants to sell his or her shares in a company it is much easier to do if a legal entity has been formed. 

Find more answers to the top 50 questions about incorporating in our newly published eBook!

Member-Managed or Manager-Managed? What's the Difference?

A Member-Managed and a Manager-Managed LLC differ in the way that the company is run.

A member-managed structure is the most common approach. This approach is recommended for companies where the members plan to have an active role in the daily activity of the company. This grants the members authority to act on behalf of the business.

In a manager-managed LLC, the members act more like silent partners and leave the day-to-day management of the company to a member-appointed manager. This operating structure is applicable only if a single member will be involved in running the company - the manager appointed can be a member.

Whichever managing approach the LLC chooses for its operation, it is important that the agreed upon rules and processes are clearly outlined in the company's operating agreement. 

What if I need to change my directors or members? It is a simple internal process to change a director or member. The company would need to have a meeting to pass a resolution indicating the new members or directors. Meeting minutes would be kept to record this transaction of resolution being signed by the current directors or members. It is also allowable, although generally not required, to file an amendment with the state naming the new directors or members. This allows for more formal documentation since the amendment would become part of the company's public record. 

The Importance of Having a Registered Agent and Address 

The first and most important reason that your business needs a registered agent and registered address is that it is required by law.  The state in which you choose to incorporate your business in will not approve the initial incorporation/ formation certificate without providing a valid registered agent and registered address.  

The registered agent and address must be located in the state of incorporation or formation and must be a physical street address.  The registered address cannot be a post office box.  The primary responsibility of the registered agent and registered address is to accept all annual report and tax notices from the state and to accept any Service of Process on behalf of the company in the event of a lawsuit.  The registered agent must be available during normal business hours Monday – Friday to accept any Service of Process on behalf of the company.  If your corporation or LLC fails to maintain a registered agent and registered address, the state may declare the company void for noncompliance.  If a corporation or LLC is declared void or noncompliant by the state, it may lose all of the liability protections provided as an incorporated entity.

Need a registered agent and address? We can help! Click Here

An important first step after forming your LLC is to draft an operating agreement that outlines the rules and protocols of how the company will conduct business and who will be in positions of ownership and management. Specifically, the operating agreement describes the responsibilities of the managers and members, the percentage of member ownership, as well as voting rights. This operating agreement is crucial to providing liability protection to the members of the LLC. It should be maintained with other corporate records such as meeting minutes and membership certificates.

In the operating agreement it is important to lay out the management style of the LLC. It can either be member-managed or manager-managed. A member-managed structure is the most common approach. This approach is recommended for companies where the members plan to have an active role in the daily activity of the company. This grants members authority to act on behalf of the business. In a manager-managed LLC, the members act more like silent partners and leave the day-to-day management of the company to a member-appointed manager. This operating structure is applicable only if a single member will be involved in running the company – the manager appointed can be a member.

It is important to maintain a membership ledger to keep track of stock issued to members.

In order to maintain good standing with the state of formation and the appointed registered agent, it is important to pay all annual fees to the relevant state authorities and registered agent in a timely manner.

Although requirements for LLCs differ, maintaining a thorough record of all meeting minutes, documents, and internal resolutions is crucial for the successful function of your LLC.

Thinking of Incorporating?

Beginning the incorporation process can seem intimidating, but the process is actually easy! For your convenience, American Incorporators has provided this three-step comprehensive list of how to get started! 

Step 1: Select a State

Things to consider when selecting a state:

• What state doe the entity of a physical presence in?
• What state does the entity have employee(s) located in?
• What state(s) does the entity conduct business in?
• What state does the entity intend to open a bank account in?

Although American Incorporators does not provide legal or financial advice, if you answered any of the above questions with multiple states, you may be required by local agencies to register to do business in more than one state.

*Registering to do business in more than one state is known as a foreign qualification/registration – American Incorporators can assist with foreign qualification/registration

Step 2: Select a Type of Entity

Limited Liability Company (LLC)

An LLC is a legal entity separate and distinct from its owners, who are called "members." Members of an LLC may include any number of individuals, partnerships, corporations, trusts, nonresident aliens, etc.

S Corporation

An S Corporation avoids the double taxation inherent to general business corporations, in which both profits and dividends are taxed.

Ownership: Shareholders –By law, the number of eligible shareholders is limited to 100. Only individuals and certain trusts and estates are allowed to own stock.

Control: Owners share ownership through stock, and business is managed through a Board of Directors; certain legal regulations also apply. 

Liability: Owner’s liability is generally limited to assets in corporation.

Taxation: Corporation is not taxed; income is taxable to the shareholders at their personal income tax rate.

C Corporation or General Business Corporation

The C Corporation is the most widely used by both small and large businesses that plan to have shareholders.

Ownership: Shareholders –Unlimited number

Control: Owners share ownership through stock, and business is managed through a Board of Directors; certain legal regulations also apply. 

Liability: Shareholder liability is generally limited to the each has invested in the corporation, unless acting as guarantor of corporate debt.

Taxation: Corporation pays tax on business income at corporate tax rate. The profits are distributed to shareholders and are taxed at personal income tax rate. 

Non-profit Corporation

A non-profit corporation is designed to provide tax-exempt status for socially beneficial businesses that support charitable, religious, educational or scientific activities. It may not be used if you intend to run your business for profit. Most non-profit corporations have either tax-exempt or 501(c)(3) status, which exempts them from paying taxes on income. To obtain either of these tax designations, an Application for Recognition must be filed with the IRS.

General Partnership

A general partnership involves at least two people, with no maximum on the number of partners allowed. There are no state filings required to form a partnership. Taxes are collected on individual partners, not on the entity. A limited partnership is a statutory form of partnership consisting of one or more general partners who manage the business and one or more limited partners who invest in the business and do not participate in management.

Ownership: Two or more individuals or other entities according to the partnership agreement

Control: By the partners in accordance with partnership agreement

Liability: All partners are jointly and severally liable for all partnership debts

Taxation: Individual partners’ prorated share of partnership income or loss is included on the respective income tax return of the partner and taxed at personal or corporate rates

Sole Proprietorship

A sole proprietorship is a business conducted by one owner, who is taxed as an individual.

Ownership: Individual

Control: By owner

Liability: Owner is personally liable for all business debts

Taxation: All business income is considered personal income to the owner and is taxed at personal income tax rates

Step 3: Contact American Incorporators

To complete the process visit us online: https://www.ailcorp.com/packages

Or call: 800.441.5940

The Importance of Having a Registered Agent and Address 

The first and most important reason that your business needs a registered agent and registered address is that it is required by law.  The state in which you choose to incorporate your business in will not approve the initial incorporation/ formation certificate without providing a valid registered agent and registered address.  

The registered agent and address must be located in the state of incorporation or formation and must be a physical street address.  The registered address cannot be a post office box.  The primary responsibility of the registered agent and registered address is to accept all annual report and tax notices from the state and to accept any Service of Process on behalf of the company in the event of a lawsuit.  The registered agent must be available during normal business hours Monday – Friday to accept any Service of Process on behalf of the company.  If your corporation or LLC fails to maintain a registered agent and registered address, the state may declare the company void for noncompliance.  If a corporation or LLC is declared void or noncompliant by the state, it may lose all of the liability protections provided as an incorporated entity.

Need a registered agent and address? We can help! Click Here

In 2016, AIL will be publishing another free eBook! You have already learned about the importance of incorporation, and all of the details about choosing an entity type, naming your entity, and tools to run your newly formed business.  You've incorporated, now what? AIL wants to provide entrepreneurs and new customers with industry insight on all the necessities to run your newly incorporated business.

This new eBook will provide advice and information about business licenses, foreign qualifications, annual tax payments, and "Doing Business As" filings to ensure that your business is operating in compliance with specific state and national regulations.  

We are also sharing advice on the ins and outs of responsible financial planning for your business expenses, whether it be business insurance, book keeping or payroll! 

Lastly, we are sharing our insight on running a successful website, and how it can positively increase your company's visibility and even sales!  

Our new eBook is filled with helpful tips for continuing to run a successful business after you've taken the first step to incorporate! Look out for its launch in 2016!