Open Corporations: Everything You Need to Know
Wondering how open corporations works? Check this out for information about open corporations.4 min read
2. How to Open Corporations: Appointing Directors
3. How to Open Corporations: Filing Articles of Incorporation
4. How to Open Corporations: Plan for Ownership Changes With a Shareholders' Agreement
5. How to Open Corporations: Holding a First Meeting of the Board of Directors
6. How to Open Corporations: Drafting Corporate Bylaws
How to Open Corporations: Choosing a Corporate Name
Your corporation's name has to comply with your state's corporate division's rules.
Your name has to be unique to your corporation.
It also has to end with a corporate designator—corporation, incorporated, limited—or an abbreviation.
Your name cannot appear to be associated with the federal government or a restricted business, so avoid words like federal, national, reserve, United States, or bank.
In order to make sure that your corporation's name is available, contact your state's corporations office.
If you're worried about another corporation taking the name you want, you can pay to reserve a particular name while you're filing your articles of incorporation.
You also need to avoid trademarked names.
As long as your name is available and legal, you don't have to file your business's name with your state because filing articles of incorporation automatically registers it.
You only have to file an “assumed” or “fictitious” name statement with your business's jurisdiction if you sell items under a name that's different from your corporation's name.
How to Open Corporations: Appointing Directors
Directors make major decisions about the corporation's policies and finances. Directors approve loans, appoint officers, determine salaries, and authorize the issuing of stock.
Normally, the initial owners of the corporation name directors prior to the business opening. Usually the owners appoint themselves, but that's not always the case.
Most states allow a corporation to have one director, no matter how many owners it has.
However, other states stipulate that there can only be a solo director if there's only one owner—if you have two owners, you need two directors, and so forth.
How to Open Corporations: Filing Articles of Incorporation
Once you've got a name and decided on directors, you have to prep and file your articles of incorporation with your state.
Usually you file with the secretary of state in your state capitol.
Articles of incorporation can also be called a “charter” or “certificate of incorporation,” but they all refer to the same basic document that creates the corporation.
You do not have to have more than one owner.
If you only have one owner, that person preps, signs, and files the document him or herself.
If you have two or more owners, it's up to you whether everyone signs or one person is appointed the “promoter” or “incorporator” to sign on everyone's behalf.
These documents aren't complex or lengthy; in just a few minutes, you can fill out a form that your state's corporate filing office provides.
You just need to specify a few details about your company:
- Address (where your main office is or will be)
- Names of directors
You likely do have to list your corporation's “agent for service of process” or “registered agent”—usually one of your company's directors. This person's name and address is on file as the public's point of contact.
How to Open Corporations: Plan for Ownership Changes With a Shareholders' Agreement
Shareholders' agreements help small corporations choose and plan for changes in leadership such as:
Once you've appointed directors, filed articles of incorporation, and created your bylaws, your directors should hold a board meeting to formalize important decisions and take care of corporate formalities.
Directors typically use this meeting to set the fiscal year for the company, appoint officers, adopt bylaws, authorize issuance of stock, and adopt a stock certificate and corporate seal.
If your business will be an “S corporation,” that status will be adopted at this meeting too.
How to Open Corporations: Holding a First Meeting of the Board of Directors
Until shares of stock have been issued, you shouldn't do business as a corporation. This step officially divides ownership interests in the business.
Issuing stock is required when doing business as a corporation; and you must follow all requirements in order to keep your legal status as a corporation.
When issuing shares of stock, you'll need to document shareholders' names, how many shares each shareholder will buy, and how they're paying for their shares.
How to Open Corporations: Drafting Corporate Bylaws
Bylaws are rules that guide the everyday operations of your corporation. They include:
- When/where directors' and shareholders' meetings will take place
- Voting requirements for shareholders
Bylaws are usually adopted at the first board of of directors meeting.
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