Is Your Corporation Fully Organized?

In order for your corporation to be fully organized, 5 things need to be true.

Incorporation

First, the Articles of Incorporation must be submitted to the relevant jurisdiction.

The jurisdiction will issue the Articles or Incorporation once the incorporation is complete.

Some jurisdictions refer to the incorporation document as the Certificate of Incorporation.

However, a corporation is not fully organized just because it’s been incorporated; the following steps are still required.

Adoption of Bylaws

Second, Bylaws must be adopted to govern the corporation. Depending on the jurisdiction, this can be done either by the incorporator or the director(s).

Appointment of Directors

Third, director(s) must be appointed.

Some jurisdictions allow the director(s) to be appointed in the incorporation document itself.

If not, the incorporator will usually appoint the director(s) in a resolution.

Appointment of Officers

Fourth, the president, the secretary, and the treasurer must be appointed.

Generally speaking, all corporations must have at least these three officers.

These positions can all be held by the same person.

Issuance of Shares

Fifth, shares of the corporation must be issued.

This requires the approval of the director(s) and the execution of a share purchase agreement between the corporation and the shareholder.

Conclusion

Once all five of these steps have been accomplished, your corporation is fully organized.

It’s important for a corporation to be fully organized so as to reduce the chances that a judge may find that corporate formalities have not been observed and “pierce the veil,” thereby subjecting shareholders of the corporation to personal liability for the obligations of the corporation.

Disclaimer

This is not legal advice and does not create an attorney-client relationship between you and the author. This article is being furnished for educational purposes only.

The author makes no warranty as to the accuracy, completeness or applicability of the information and undertakes no obligation to update the information.