general background on incorporations
TRANSCRIPT
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General Background on Incorporations
-Basic Information-
These forms are designed to conform with the corporation laws of the state of incorporation.
These forms are not designed to be used for a corporation conducting licensed professional activities,
e.g., medical, dental, law, accounting, architecture, etc. Obviously, the corporation may only conduct
those activities not prohibited by applicable state law. Generally, the forms are suitable for a small
or mid-size corporation.
The establishment of a corporation requires the filing of a document variously called Articles
of Incorporation (Certificate of Incorporation or Charter) (hereinafter the “Articles”) with the
appropriate state authority usually called the Secretary of State. Bylaws (or Regulations) (herein
after the “Bylaws”) govern the internal management processes of a corporation. A measure of
flexibility is allowed under applicable state statutes, but the terms of Bylaws should not conflict with
either the governing state statutes or the Articles. The Minutes of the Organizational Meeting of
Directors (or in the alternative the Consent to Organizational Actions of Directors) is the key
document required to complete the organization of a corporation.
All terms of governance, except matters acceptably covered by so-called default provisions
of the applicable state corporation laws, should be reflected in the Bylaws adopted by the Board of
Directors on behalf of the corporation. Matters not addressed in the Articles or Bylaws will be
governed by the default provisions in applicable state statutes governing corporations. Some
provisions under state law are mandatory and cannot be overridden by the Articles or Bylaws.
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Efforts have been made to avoid provisions in the form of Bylaws which conflict with
mandatory provisions of the applicable corporation laws, but such conflicts may yet exist. If such
a conflict exists, the mandatory state statutory law provision will supersede any offending provisions
in the form of Bylaws. In matters of governance under the form of Bylaws, users are advised to
consult with legal counsel.
Under the form of Bylaws, the overall management of the corporation is by the Board of
Directors elected at the annual meeting of the shareholders. Day to day matters are handled by
officers who are elected by the Board of Directors. Annual meetings of directors and shareholders
(or in the alternative, annual Consents to Actions) are required. In addition, the Bylaws address
among other matters, election of directors, meetings of directors, election of officers, meetings of
shareholders and maintenance of records. Indemnification of officers and directors is addressed
generally. The standard of care of directors and officers is not addressed in the form.
Transfers of shares are restricted under an optional provision of the Bylaws. Cash
distributions that threaten solvency of the corporation are limited by state law in various ways.
Events of dissolution are governed by mandatory provisions of state statutes and are not addressed
in the Bylaws. Amendment of the Bylaws is addressed in the form in a specific way. Other methods
of amendment may be available under applicable state law.
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A number of significant resolutions (or consents to actions) are provided in the form of
Minutes of Organizational Meeting of Directors (and, in the alternative, Consent to Actions) dealing
with adoption of Bylaws, election of officers, designation of registered agent, issuing of shares, and
bank accounts and important tax matters including election of S Corporation status and adoption of
a medical expense reimbursement plan. A user of the forms should consult with his or her tax
advisor concerning election of S Corporation status and adoption of a medical expense
reimbursement plan.
The above descriptive material and the forms are not intended to be, or to replace the need
for, professional legal advice concerning the establishment and operation of a limited liability
company, or the need for professional tax advice. Persons outside of the legal profession must seek
professional legal and tax advice prior to the use or adaption of the forms for his or her particular
requirements. Persons who are not professionally conversant with corporation law or taxation must
seek professional legal and tax advice prior to the use of the forms for his or her particular
requirements.
The forms were prepared with attention given to the basic requirements of the laws of the
state of incorporation. These forms without changes may not be suitable for all circumstances. The
forms are not a substitute for a detailed review of applicable state statutes and legal advice. Please
be advised that laws governing corporations are subject to change from time to time. Users or, as
appropriate, their professional advisors, are strongly advised to review the applicable statutes for
recent changes.
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©2005-2007 ATTORNEYS CORPORATION SERVICE, INC. ALL RIGHTS RESERVED.
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FOOTER PAGE
June 2, 2007
C:\ACS\CorpDocuPAK-CA DB\PDFSource\Corporate Multi General Background.wpd
General Background on California Corporation
-Basic Information-