Business Formation

The bylaws of a corporation contain the procedures and rules that govern the rights and powers of the directors, shareholders and officers. The bylaws are usually adopted by the Incorporator or by the Board of Directors in an organizational meeting or with the written consent in place of the organizational meeting.

Generally, a corporation's bylaws cover the size of the Board of Directors; when and how board meetings occur; when and how shareholder meetings occur; the duties and responsibilities of the officers; The procedures for exercising voting rights; the procedure for dividends; the company's calender or fiscal year; and the indemnification of the directors, officers and agents of the corporation.

The corporation's minute book is where various important records are kept. It should include the Bylaws, Articles of Incorporation, and minutes covering all meetings and actions by the Board of Directors and shareholders. The minute book must be kept current and contain pertinent, necessary documentation. The minute book should be stored at the corporations registered office.

The filing fees with the various Secretary of States vary, but generally the fee range is between $100 and $300.

The Board of Directors should try to accomplish the organizational resolutions of the corporation by adopting them in their first meeting. Generally, they should authorize the adoption or ratification of the bylaws, the election of the initial officers, the designation of the principal officer, the designation of the corporation's banks, the selection of the calendar or fiscal year, the selection of a specimen stock certificate for the common stock, the issuance of stock to initial shareholders, the payment procedure of the organizational expenses, and the possible election of the S corporation status.

A "S" Corporation is formed the same way a regular "C" Corporation is formed. A corporation is a legal entity created under the laws of a particular state. It is distinct from its owners, who are called shareholders. The only difference between an "S" and a "C" is that an "S" corporation is one in which an election has been made to be treated under Subchapter "S" of the Internal Revenue Code for federal tax purposes. The filing of this "S" election permits the corporation to avoid a double taxation of its income, bypassing the corporate tax level. Generally, Form 2553 must be filed with the IRS within 75 days of incorporating. Many states also require a separate form be filed with them to allow "S" status. Other states and cities, such as New York City, do not acknowledge "S" status. As a result of these complexities, the election of "S" status should not be considered nor attempted without consulting your local CPA or attorney.

No, but a qualified professional is recommended. CPAs can be used to incorporate your business and prepare all forms required to obtain your Federal ID number and make your "Subchapter S" elections with the federal government and your state. CPAs are qualified to interact with other professionals and instruct them as to the requirements of their clients. However, CPAs should not play attorneys. Lawyers are needed to draw up shareholders' agreements, minutes and contracts based upon the advice given to you by your CPA. Lawyers reduce the advice to writing. Both a Lawyer and a CPA are valuable, necessary assets when starting your new business. You need both, but a CPA can provide the initial incorporation services.

A corporation is a legal entity formed under the laws of a particular state. The state you pick is usually the state you intend to do business in. If you are definitely going to do business in only one state and you don't believe you will raise capital from investors in the future, the answer is easy ... Use the state you are doing business in.

Each state charges different filing fees for incorporation. California is three times the cost of New York State because an $800 initial minimum tax payment is required in addition to other charges. The fee your CPA charges for incorporating usually includes these disbursements made on your behalf.