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TitleIncorporating Your Business For Dummies
TagsFor Dummies
File Size3.3 MB
Total Pages353
Table of Contents
	What You Shouldn’t Expect
	About This Book
	What You’re Not to Read
	Foolish Assumptions
	How This Book Is Organized
	Icons Used in This Book
	Where to Go from Here
Part I : Is a Corporation Really for Me?
Chapter 1: What’s a Corporation?
	Defining Corporations
	The Structure of Corporations
	Puzzle Pieces for Incorporation: Statutes, Articles, and Bylaws
	The Past Paves the Way for the Present
	Looking to the Future of Corporations
Chapter 2: Choosing an Entity That Works for Your Business
	Reaping the Benefits of Incorporation
	Incorporation Might Not Be for Me If . . .
	What Other Types of Business Entities Are There?
	Converting to a Corporation
Chapter 3: Getting My Ducks in a Row — A Pre-incorporation Checklist
	Choosing a Name
	Deciding Where to Incorporate
	Picking Directors and Assigning Duties
	Assigning Officers and Their Duties
	Things to Know about Shareholders
	Capitalizing the Corporation
	Deciding What to Include in the Articles of Incorporation
	Putting Together the Bylaws
	Selecting a Registered Agent and Office
	Deciding upon Cumulative Voting for Directors
	Including or Excluding Preemptive Rights
	Deciding Whether S Corporation Status Works for You
	Carrying Out Pre-incorporation Activities
Part II : How Do I Incorporate?
Chapter 4: Who Can Help Me Incorporate?
	Doing It Yourself
	Calling an Incorporation Service Company
	Hiring a Professional
	Choosing What’s Best for You
Chapter 5: Where, Oh Where Should I Incorporate?
	Deciding Where to Do Business
	Checking Out the Buzz on Delaware
	Betting on Nevada
Chapter 6: Winning the Name Game
	Reserving Your Corporate Name
	Choosing a Fictitious or Assumed Business Name
	Registering Internet Domain Names
	Selecting a Domain Name Provider
Chapter 7: Getting Down to Business with the Articles of Incorporation
	The Basics Behind the Articles of Incorporation
	Understanding What’s Required in the Articles of Incorporation
	Adding Additional Pieces to the Puzzle
	Amending Your Articles
Chapter 8: Getting to the Nitty-Gritty with Your Bylaws
	Bylaw Basics
	What Should Be Included in the Bylaws
Chapter 9: Capitalizing Your Corporation
	Show Me the Money
	The Battle of the Century: Equity versus Debt
	Documenting What You Do
Chapter 10: Doing Business in Other States
	Deciding Where You Are Doing Business
	Qualifying to Do Business in Other States
	Living as a Foreign Corporation
Part III : I’ve Incorporated My Business, Now What?
Chapter 11: Conducting an Organizational Meeting
	An Organizational Meeting: Is It Worth My Time?
	Let’s Talk About . . . : Discussion Items for Your Organizational Meeting
	What About . . . : Other Matters to Consider
	Documenting Organizational Activities
Chapter 12: Getting Started: Numbers, Elections, Registration
	Obtaining Federal and State Identification Numbers
	Filing S Corporation Elections
	Registering Your Corporation in the State of Incorporation
Chapter 13: Shareholders: Do’s and Don’ts
	The Making of a Shareholder
	We Know Our Rights!
	Duty Calls
	So Sue Me
Chapter 14: Preparing Shareholder Agreements
	Shareholder Agreements: Deciding Which Is Right for Your Corporation
	It’s All in the Timing: Adopting a Shareholders’ Agreement
	Close Corporations: A Different Set of Rules
Chapter 15: Understanding the Role of Directors and Officers
	Putting Together a Board of Directors
	Appointing Officers
	Hiring, Firing, and Replacing Board Members and Officers
	Knowing Who Has Authority
	Understanding the Legal Duties and Responsibilities
	Making Mistakes: When Directors or Officers Goof Up
	Insuring Your Directors and Officers Against Mistakes
Chapter 16: Director and Shareholder Meetings
	Hosting a Shareholder Meeting
	Holding a Meeting for the Board of Directors
	What Every Meeting Should Include
	Documenting Board and Shareholder Meetings
Chapter 17: Getting Money (And Other Items of Value) In and Out of the Corporation
	Getting Money or Other Items of Value into the Corporation
	Getting Money or Other Items of Value Out of the Corporation
Part IV : Compliance Issues — The Paper Trail Continues
Chapter 18: Documenting Corporate Actions
	Protecting Yourself with Documentation
	Creating Corporate Meeting Minutes
	Signing Corporate Documents
	Taking Care of Business: Letterhead, Phone Listings, and the Rest
Chapter 19: Corporate Record Keeping
	Corporate Records: What to Include
	Keep Corporate Records on Site and in Sight
	Shareholders Sneak a Peek
	Organization Made Easy with a Corporate Kit
Chapter 20: Getting Your Financial Information in Order
	Filing an Annual Report
	Filing a Corporate Franchise Tax Form
	Filing Income Tax Returns
	Deciding Who’s Responsible
	Maintaining a Good Relationship with Your Bank
	Documenting Banking Transactions
Chapter 21: Closing Up Shop
	Terminating the Company with Dissolution
	Following the Rules: Formally Dissolve and Liquidate
	Losing Out to Bankruptcy
Chapter 22: Who Can Help Me with Corporate Compliance Matters?
	Doing It Yourself
	Calling an Incorporation Service Company
	Hiring a Professional
	Choosing Between the Three
Part V : The Part of Tens
Chapter 23: Ten Ways to Locate and Retain a Good Professional Team
	Pick Your Professionals
	Shop Around
	Ask Lots of Questions
	Discuss Fees in Advance
	Ask Who Will Do My Work
	Find Out What You Can Learn to Do on Your Own
	Discuss What Other Services Are Available as Your Business Grows
	Find Out When Your Team Is Available
	Don’t Nitpick Your Professional
	Keep Your Professionals Up to Date
Chapter 24: Ten Things You Never Want to Do with Your Corporation
	Don’t Hold Yourself Out as the Owner of the Corporation
	Don’t Commingle Personal Assets with Business Assets
	Don’t Make Personal Use of Business Property
	Don’t Forget to Document Important Corporate Transactions
	Don’t Fail to Deal with the Corporation at Arm’s Length
	Don’t Neglect Your Corporate Taxes
	Don’t Fail to File Required Reports
	Don’t Defraud Creditors and Shareholders
	Don’t Engage in Criminal Conduct
	Don’t Fail to Maintain Adequate Insurance Coverage
Chapter 25: Ten Common-sense Principles to Incorporate and Live Each Day By
	Know Your Personal Philosophy and Values
	Get It in Writing
	Read the Entire Document When You Sign It
	If You Don’t Understand, Ask Questions
	Be Consistent
	Treat Others the Way You Would Like to Be Treated
	Don’t Try to Do It All
	Anyone Can Be Sued at Any Time for Any Reason
	Principle Can Be Expensive
	Know When to Fold Them
Appendix A: Sample Forms
	Articles of Incorporation Sample
	Sample Bylaws
	Organizational Minutes
Appendix B: Resources
	Contacts for Your State of Incorporation
	Additional Resources
Appendix C: Glossary
Document Text Contents
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small business that may be dependent on its shareholder/employees for its

Your accountant is a good person to help you determine the value of
your corporate stock. A number of methods to value your corporation
exist, and many accountants can fine-tune any formula to fit a
particular business. Possibilities include the book value of the
corporation or a formula based on the earnings history of the

It’s often preferred that shareholders agree annually as to the value of the
corporation’s stock, usually as part of the annual shareholders’ meeting. No
one has a better feel for what the corporation is worth than the actively
employed shareholders — let them have the first stab at it. As a backup, the
agreement could provide that, if the shareholders haven’t agreed to a
valuation within the preceding two years, they use a default formula to
determine value.

Payment distribution

If you’re a shareholder whose shares are being purchased, you want to get
your money fast. If you’re a corporation or a remaining shareholder, you may
want to stagger the payments over time to ease pressure on corporate cash
flow. It’s not in the interest of anyone to create a financial burden on the
corporation, which could cause the business to fail.

Buy sell and stock purchase agreements often allow for payments to be made
on an installment basis. Here are a few possibilities:

If insurance monies are available, these dollars get paid in full as soon as they
are received.

Pay a certain amount (10 percent, for example) up front, with the balance
paid in equal monthly installments over a set period of time (60 months, for

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Provide for payment in full at such time as the outstanding balance falls
below a predetermined amount, such as $5,000.

A promissory note that sets the payment obligation and interest rate is used to
document the deferred obligations. Occasionally, remaining shareholders are
obligated to pledge their shares of stock as security for the payment

A payment formula and deferred payment option don’t apply to restrictions
relating to lifetime transfers. A lifetime transfer is any transfer that occurs
during the lifetime of the person transferring shares. It could be a sale or gift
of shares to another. With a lifetime transfer, the third party seeking to
purchase the shares sets the price and payment terms, and the corporation or
remaining shareholders seeking to purchase shares must match the third
party’s offer.

Whenever a stock purchase or buy sell agreement is used, two things must
occur to enhance the enforceability of the agreement. First, the corporation
should be one of the parties. This is especially true where the agreement
imposes an obligation to purchase on the corporation. Second, the stock
certificates must contain language that clearly indicates that the transfer of the
shares is subject to the terms and conditions of a stock purchase or buy sell
agreement. Without this language, the agreement may not be binding on third
persons who acquire the shares. The corporation or remaining shareholders
might have a breach of contract claim against the transferring shareholder but
no recourse against the third party acquiring the shares. Don’t forget to add
this restrictive language to corporate stock certificates.

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ownership of a majority of its voting shares by another corporation or
business entity.

A requirement set forth in articles or bylaws requiring a vote
greater than a simple majority in order to accomplish certain tasks. Common
examples of circumstances using supermajority requirements include: article
or bylaw amendments, decisions to merge or dissolve the corporation, or
decisions that would require the expenditure of a large amount of money.

A merger, acquisition, or other change in the controlling interest of
a corporation.

A corporation that is the focus of a takeover attempt.

Any organization that is determined by the
Internal Revenue Service (IRS) to be exempt from federal taxation of income.
A tax-exempt may be required to operate exclusively for charitable, religious,
literary, educational, or similar types of purposes.

A word or mark that distinctly indicates the source of a product
or service, and that is legally reserved for the exclusive use of its owner.

Shares of a corporation reacquired by a corporation.

A company that purchases shares of a corporation and arranges
for their sale to the general public.

Action by shareholders, incorporators, or initial
directors to dissolve a corporation.

Any agreement by two or more shareholders
to vote their shares in a particular manner; most often used in the election of

Rights of shareholders to vote their shares pursuant to

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provisions of statutes, the articles of incorporation, and the bylaws.

An arrangement among corporate shareholders that
occurs when shareholders transfer their shares to a trustee in exchange for
voting trust certificates. The trustee votes the shares as a block in the manner
provided by the voting trust agreement. It’s a means to preserve voting
control of the corporation by the shareholders who are parties to the

Shares that have been issued for a consideration less than
the par or stated value of the shares.

The discharging of a corporation’s liabilities and the distributing
of its remaining assets to its shareholders in connection with its dissolution.

The statutory procedure whereby a foreign corporation obtains
the consent of a state to terminate its authority to transact business there.

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