Incorporation

Incorporation is the process of creating a CORPORATION. The rules on incorporating vary somewhat from state to state, with Delaware often perceived to be the most desirable state in which to incorporate because its fees tend to be low. The “articles of incorporation” typically create the company name, designate its corporate officers, identify its headquarters, indicate the amount of CAPITAL involved, and establish BYLAWS (rules of CORPORATE GOVERNANCE). A main reason for incorporating is to obtain “limited financial liability,” which restricts, under most circumstances, owners’ LIABILITY to their capital INVESTMENT. The two major reasons some businesses do not incorporate is its cost and being subject to corporate taxation. To incorporate, generally a business organizer
• prepares articles of incorporation
• signs and authenticates the articles
• files the articles with the state’s secretary of state and pays filing fees
• receives a “filed” copy of the articles from the secretary of state
• holds an organization meeting for the purpose of electing officers, adopting bylaws, and transacting other business
Although a corporation may do business in many states, usually the relationship among the corporation, its SHAREHOLDERS, and its managers is regulated by the state in which it was incorporated. The American Bar Association prepared a model statute that has been used by most states as the basis for their incorporation statutes.