Articles of Incorporation
This document, which is also sometimes referred to as the Corporate Charter or Certificate of Incorporation, is the official document filed with the Corporate Filing Office (usually the Secretary of State’s office). It sets out the essential organization and structure of the corporation. The required contents vary from state to state but usually include, at a minimum, the name of the corporation, the name and address of the incorporator, the name and address of the registered agent, and the stock structure of the corporation (how many shares of stock are authorized to be issued).
Optional provisions of the incorporation articles may include items such as a particular stock structure for preferred stock shares, the initial directors’ names, pre-emptive rights for shareholders, and an indemnification clause for directors. Any changes made to the articles of incorporation must be approved by shareholders and filed with the state. Most Corporate Filing Offices have standard forms available for articles of incorporation.
Bylaws
This document is not filed with the Corporate Filing Office but is essential for the corporation’s organization. Bylaws contain the regulations and rules a corporation adopts to govern its internal affairs. Bylaws provide the framework for conducting corporate business, such as requirements for holding meetings, voting requirements, quorum requirements, qualifications and appointment procedures for directors and officers, etc. The state corporation law provides the requirements for bylaws. Most bylaws are standard but essential and should be read and understood by the corporation’s officers, directors, and shareholders.
Minutes of Organizational Meeting
Once the Articles of Incorporation are filed with the Corporate Filing Office, the corporation’s initial directors should hold an organizational meeting. (If initial directors were not named in the Articles of Incorporation, then the incorporator can appoint initial directors through a Consent in Lieu of Corporate Meeting or by adopting a resolution for that purpose.) The main business customarily conducted at an organizational meeting includes the approval and ratification of the Articles of Incorporation, the adoption of bylaws, the appointment of officers, and the authorization for the issuance of shares of stock. Other business may also be conducted as needed.
If all directors agree, then the business of an organizational meeting can also be conducted by preparing a Consent in Lieu of Corporate Meeting document providing resolutions for the various items of business described in the paragraph above. The consent must be signed by all directors.
Stock Certificates – Shareholders own a corporation, and stock certificates are evidence of their stock ownership. Certificates are not required in most states, but it is still considered good practice to issue certificates to help provide evidence of the organization of the corporation. From a purely practical point of view, people like to have something to show ownership, and shares of stock provide that. However, the absolute authority for ownership of shares is a board of directors’ resolution authorizing shares to be issued to a specific individual or entity.
Shareholder’s Agreement (optional) – Some shareholders desire or need to enter into a more specific agreement concerning their relationship, especially concerning what happens when a shareholder dies or decides to leave the business. Sometimes, these issues are covered in the bylaws, but special provisions are often set out in a separate agreement, such as a Shareholder’s Agreement or a Buy-Sell Agreement. These documents may contain special procedures and requirements that must be followed if a shareholder dies or decides to leave the corporation and can also provide a formula or procedure for determining the value of shares.