When you incorporate a business, the law expects you to impose some sort of structure on the enterprise. This is a fundamental tradeoff that comes with the liability, financial, legal, and tax benefits. If you're planning to form a corporation, you may not be certain how to create the necessary structure and empower it. You will need to do these four things.
Articles of Incorporation
Under corporate law in the U.S., a firm must officially declare its existence. A corporate lawyer will encourage you to create articles of incorporation. These documents officially establish the company as a corporation. Likewise, they declare what kind of corporation it is.
For articles of incorporation to be legally binding, you'll need to file them with a U.S. state. Before you incorporate a firm in a particular state, though, you should speak with a corporate lawyer from that area. They can help you understand the basic requirements like document filings and residency rules.
Officers and Boards
A corporation must have a governing structure. Typically, firms use a model that assigns executive power to a group of officers. Corporate officers are responsible for a company's day-to-day operations. For example, a chief financial officer might be responsible for collecting accounting information and producing reports.
Additionally, a corporation will have a board. This is a group that has an interest in the company. The board will discuss matters critical to the firm's operation. If the company has shareholders, the board may also make recommendations to the shareholders about any potential votes.
Every corporation needs rules in place. For example, it should maintain rules to resolve disputes. For example, what if the CEO took actions the board and shareholders don't like? Ideally, the rules should state who has to initiate action against the CEO. Likewise, they will state when the issue goes before the full board and how to authorize a shareholder vote. This provides a disciplinary mechanism that allows punishments up to firing the CEO.
Notably, a corporation isn't a single asset. Instead, it issues shares, and those shares represent the collective asset value of the business. This allows the corporation to assign shares to founding members and investors, and it also allows them to sell or buy shares under certain circumstances.
Shareholders have rights under corporate law. Collectively, the shareholders have the final say on all matters by voting. Shareholders can remove or install officers and board members at will, as long as they have the votes.
For more information, contact a corporate lawyer.