Business Docx: Corporate Formation
MODEL FORMATION DOCUMENT (ARTICLES OF INCORPORATION)More robust than statutory articles, the Model Articles of Incorporation include options for various capitalization approaches to provide for multiple classes of common or preferred stock in C corporations, or voting and non-voting (single class) stock rights for S corporations. These Articles also include options for preferential treatment in liquidations and distributions, dividend rights, redemption rights, and additional sophisticated planning options for your corporate clients.
AGREEMENT TO FORM A CORPORATIONThis document memorializes the understanding of parties to form a new corporation before the corporate filing actually takes place. While not essential in forming a new corporation, this type of agreement can be very helpful in establishing a written record of the parties’ mutual expectations. Statements made in the Agreement to Form a Corporation should generally complement provisions later included in the Corporate Bylaws; a material discrepancy between these might give rise to questions or misunderstandings. The Agreement to Form can also strengthen the corporate veil by clearly expressing the intent among the shareholders to form a well-designed company.
WAIVER OF NOTICE OF MEETING/CONSENT TO ACTION OF INCORPORATORThis waiver and consent is signed by the incorporator of a new company and memorializes the agreement (or action of a single incorporator) to create the company. It is an important part of the initial record keeping for a new company, demonstrating that the initial formalities have been followed.
WAIVER OF NOTICE OF ORGANIZATIONAL MEETING/CONSENT OF DIRECTORSThis waiver and consent is signed by the directors of a new company and memorializes the agreement (or action of a single incorporator) to create the company and to execute the corporate bylaws. This document memorializes the directors’ agreement and terms of compensation, addresses initial assignment of intellectual property and other valuable assets, and memorializes various tax elections that will be made as the entity is formalized.
MINUTES OF ORGANIZATIONAL MEETING OF DIRECTORSThis essential document memorializes the decisions made by the directors during the meeting to form the new company. It identifies the directors who participated and memorializes many of the compensation, capitalization, tax elections, and other essential decisions that are made when parties decide to form a new company. The document contemplates the preparation of Bylaws to further govern the new company. This is yet another essential document that must be part of the documentation to properly establish a new company.
CORPORATE BYLAWSThe Bylaws are the lifeblood of the new company. The Bylaws will establish how the new corporation will be governed, how and when meetings will be held, how those meetings will be documented, how the meetings will be governed, and how voting happens. The Bylaws establish the powers and limitations for the board of directors, and they address how directors are elected, removed, and replaced. Corporate Bylaws explain how shares in the company are documented and how they can be transferred, and otherwise address all other major decisions and actions by the board and shareholders in the corporation. Though complete and thorough recordkeeping is essential in corporate formation, the Bylaws may be the most important single component of the company’s records.
SUBSCRIPTION AGREEMENTUsed in establishing the initial ownership interests in a new corporation, the Subscription is a written agreement to purchase a specified number of shares in a company at a later date. The Subscription constitutes a legal obligation to contribute capital in exchange for equity, with subscribed stock credited to the subscriber as capital is contributed to the company.
SHAREHOLDER CERTIFICATE OF INTEREST (STOCK CERTIFICATE)Corporate Stock Certificates document the ownership of shares in a corporation.
VOTING TRUST AGREEMENTThe Voting Trust is used to aggregate – and sometimes asset protect – the voting interests of shareholders in a company. This structure might also be used to create a “blind” trust to mitigate potential conflicts of interest among the shareholders. The trustee of the Voting Trust exercises the voting powers of the shareholders according to the powers provided in the trust agreement.
VOTING TRUST CERTIFICATEUsed in administration of a Voting Trust, this Certificate evidences the transfer of stock from the shareholders into the Voting Trust.
SHAREHOLDER LISTThis Exhibit documents the names of the initial shareholders and their respective ownership interests in the corporation and should be kept up to date for voting and distribution purposes.
SHAREHOLDER CONTRIBUTIONS SCHEDULE
This Schedule documents the contributions of each shareholder.
Get Startup Smart: Choosing the Right Entity for a New Business
Choice of entity is fundamental to business planning. Help your small business clients make the right choice by evaluating these key factors.Learn More
Case Studies in Asset Protection, Part 3: High Risk Assets
Download this article to learn more about LLC entity planning to mitigate risk for certain client assets.Learn More