Key Takeaways

  • C corporations must comply with both state and federal regulations during formation and operation.
  • Appointing a board of directors is a legal requirement for all C corporations, with each state setting minimum officer roles.
  • Boards typically oversee major business decisions and are distinct from shareholders and corporate officers.
  • Directors must meet regularly, maintain meeting minutes, and adhere to fiduciary duties such as care and loyalty.
  • The number of directors and their qualifications may vary by state, but a written set of bylaws should define roles and responsibilities.
  • A corporation must maintain good standing by filing required annual reports and keeping its registered agent information current.

C corp requirements allow a corporation to be formed under state law. The corporation will be governed in accordance with the rules applicable in the state where the members set up the enterprise. 

Information About Forming a C Corporation

It is recommended to set up and register a corporation in the state where the business is based. However, there are some states, such as Nevada and Delaware, that have more favorable laws regarding corporations. Operating from one state is less costly, though, as you will avoid having to register in multiple states as well as paying taxes in those states.

If you file in Nevada or Delaware but will not be doing business in either state, you must register your business as a foreign corporation in the state where your business is physically located and pay applicable taxes. If you fail to pay the taxes due in Nevada or Delaware, the corporation is considered illegally operating.

Choosing a legal name that addresses state requirements is also an important step. The name you want cannot be too similar or identical to another business or cause confusion, nor can it be one that is barred according to state law. Check with the Secretary of State where your corporation will be doing business to ask about reserving the name you want.

If you plan to have a corporate website, wait to purchase a domain that uses the name until you've confirmed that it's available and legal to use that name for your corporation. Note that the name you register must include "incorporated," "corporation," "limited," "corp.," "ltd.," or "inc." at the end.

Steps to Form a C Corporation

Articles of Incorporation

A fundamental requirement to form a C corporation is the creation of its articles of incorporation. This document:

  • Serves as the basis of the corporation's structure.
  • Outlines the way the enterprise will operate and lists the principal officers.
  • Serves as a charter that enables the corporation to be created.

Articles of incorporation are created and then filed with the Secretary of State.

Stocks and Shareholders

A C corporation is owned by shareholders. To clarify what happens to a shareholder's interests in case there is a bankruptcy, retirement, or disability, creating a shareholder agreement is advised.

C corporations must be in compliance with federal and state law in regard to stock and shareholders. Once compliance is fulfilled, stock certificates can be issued to shareholders. 

Business Licenses

Apply for a business license and certificates, if applicable, to create a C corporation. You must also apply for an Employer Identification Number from the Internal Revenue Service.

Your state or local agencies may require additional identification numbers. Check with the local licensing board and apply for any that are required. Since requirements may vary in different jurisdictions, you will need to determine if your business will be responsible for taxes related to payroll, disability, and unemployment.

Board of Directors

C corporations must appoint and maintain a board of directors. The board members are charged with overseeing all operations of the business.

Each state in the U.S. requires a corporation to have a minimum of two officers, including a president and a secretary. There are no limitations to the number of directors appointed to the board. Other positions can be created at the C corporation's discretion.

Registered Agent

The C corporation must appoint a registered agent in the state where the business is located and in any other state where the corporation does business. The resident agent is also referred to as an "agent for service of process."

The agent may be a business entity such as a law firm or an individual. The agent is authorized to accept petitions in a lawsuit or a summons involving the corporation. The designated agent can be either a professional registered agent or a corporate officer.

Bylaws

Written bylaws are required to operate a corporation. These are the rules that govern the shareholder agreement and the corporation.

The bylaws should include information on the number of directors, how long they'll serve, compensation of officers, rules for amending and adopting bylaws, and the time and place for shareholder, officer, and director meetings.

Bylaws apply for the duration of the corporation, but they can be amended.

C Corp Board of Directors Requirements

Every C corporation is legally required to have a board of directors. These individuals are elected by the shareholders and are responsible for high-level decisions and overseeing corporate affairs. While state laws vary slightly, most jurisdictions follow similar standards.

Minimum Number of Directors:The number of directors required typically depends on the number of shareholders:

  • A single-shareholder corporation may have just one director.
  • A corporation with two shareholders usually must have at least two directors.
  • If there are three or more shareholders, at least three directors are often required.

Always consult your state’s corporation statute to determine the specific minimum. For example, Delaware requires only one director regardless of the number of shareholders.

Director Roles and Responsibilities:Board members are not involved in daily operations—that’s the job of corporate officers. Instead, directors:

  • Approve major corporate actions (e.g., mergers, large contracts, issuing new shares).
  • Set broad policy and strategic goals.
  • Elect or remove officers.
  • Ensure the corporation complies with legal and ethical standards.

Fiduciary Duties:Board members owe the corporation fiduciary duties of care and loyalty:

  • Duty of Care: Directors must make informed decisions using due diligence.
  • Duty of Loyalty: Directors must avoid conflicts of interest and always act in the corporation’s best interest.

Annual Meetings and Documentation:Most states require:

  • Regular (at least annual) board meetings.
  • Detailed minutes of all meetings.
  • Proper documentation of decisions, which protects the corporation’s liability shield.

Qualifications and Restrictions:There are generally no specific qualifications, but some corporations may require directors to be residents or shareholders. The bylaws or articles of incorporation can set further limitations or criteria.

Compensation and Removal:

  • Directors may or may not be compensated, depending on the corporation’s policy.
  • Shareholders typically have the authority to remove directors through a vote, especially for cause such as breach of fiduciary duty or misconduct.

Maintaining a compliant and effective board of directors is essential to meeting legal obligations and ensuring the smooth governance of your C corporation.

If you need legal assistance with understanding or setting up C corp board of directors requirements, you can connect with experienced attorneys on UpCounsel’s marketplace.

Frequently Asked Questions

How many directors does a C corporation need? It depends on the number of shareholders and state laws. One director may suffice for single-shareholder corporations, but three is common for multi-shareholder corps.

Do directors have to be shareholders in a C corporation? Not usually. Most states do not require directors to also be shareholders unless the corporation’s bylaws specify otherwise.

Can one person be the sole shareholder, director, and officer in a C corporation? Yes, in many states, a single person can hold all three roles in a closely held C corporation.

What are the fiduciary duties of C corp directors? Directors must act in the corporation's best interests by exercising the duties of care and loyalty—meaning they must make informed decisions and avoid conflicts of interest.

How can shareholders remove a director from the board? Typically, shareholders can vote to remove a director during a special or annual meeting, particularly if the director fails to meet fiduciary or legal obligations.

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