Business Resources / C-Corporation

PREINCORPORATION CHECKLIST

I. States of Incorporation and Qualification.

A. Ascertain the address of the corporation's principal place of business and also the addresses of other offices and places of business.

B. Determine the state of incorporation for the corporation.

1. For the typical closely held corporation, the most convenient state of incorporation will be the state of the corporation's principal place of business.

2. If the corporation has significant contacts with another state, this may influence the decision.

C. If the corporation will transact business in states other than the state of incorporation, determine whether the corporation must qualify to do business in those other states.

II. Corporate Name.

A. Select a proposed corporate name that reflects the corporation's status and is not inconsistent with its purposes.

1. Since the first choice of name may not be available if it is the same as or similar to the name of an existing corporation, it may be advisable to select one or more alternatives.

2. The availability of the name should be determined in advance by contacting the secretary of state in the state of the proposed incorporation and any other states in which the corporation expects to operate.

B. If a delay in the filing of articles of incorporation or in qualifying to do business in other states is anticipated, consider reserving the proposed name in one or more states.

III. Registered Agent and Office.

A. Determine who the registered agent of the corporation will be and what the address of the registered office will be.

B. If the corporation will qualify to do business in other states, determine who the registered agent and registered office will be in each of those other states.

IV. Incorporator.

A. Ascertain the name and address of the incorporator.

B. Since the duties of the incorporator are limited, the attorney who creates the corporation will often serve as incorporator.

V. Board of Directors.

A. Determine the number of members there will be on the corporation's initial board of directors.

B. Ascertain the names and addresses of the initial board of directors of the corporation.

C. Consider whether special bylaw provisions are required for such things as the filling of vacancies on the board of directors, quorum requirements for director meetings, and supermajority requirements for certain director actions.

VI. Stock.

A. Determine what type or types of common or preferred stock the corporation should be authorized to issue.

B. If the corporation will have more than one class of stock, determine what the incidents of each class will be in terms of voting rights, dividend rights, liquidation preference, and par value.

C. Determine whether cumulative voting is desired and, if so, provide for it in the articles of incorporation.

D. Determine whether preemptive rights for shareholders are desired and, if so, provide for them in the articles of incorporation.

E. Consider whether supermajority voting requirements will apply to certain types of shareholder actions and, if so, include provisions imposing those requirements in the articles of incorporation and bylaws.

VII. Shareholders.

A. Ascertain who the initial shareholders of the corporation will be and their names and addresses.

1. Ascertain the number and type of shares that each initial shareholder will subscribe to.

2. Ascertain the consideration that each initial shareholder will be transferring to the corporation in exchange for the shares.

B. Determine whether an exemption from the registration requirements of the securities laws will be available for the initial issuance of the corporation's stock.

1. In this regard, consider both state and federal securities law.

2. If an exemption is not available, consider the steps necessary to comply with applicable registration requirements.

VIII. Officers.

A. Determine what officers the corporation will have and who the officers will be.

1. A corporation must have a president and secretary.

2. One or more vice-presidents and a treasurer may be named if desired.

B. Determine what the compensation of the officers will be.

C. Consider whether employment agreements should be entered into between the corporation and its officers or key employees.

IX. Banking.

A. Ascertain the name and address of the bank the corporation will use as the depository for the corporation's funds.

B. Determine who the authorized signers will be on the corporation's account and whether one or more signatures will be required on checks and withdrawals.

C. Determine whether bank loans will be required at the time of the commencement of the corporation's business.

X. Shareholder Agreements.

A. Consider whether the corporation should have a buy-sell agreement restricting the transfer of stock and providing for liquidation of shareholders' interests upon death and other events.

B. Consider whether the shareholders of the corporation wish to enter into a shareholders voting agreement or other arrangement controlling the voting of shares.

C. Consider whether the shareholder-employees should enter into a hedge agreement with the corporation.

D. If the corporation will elect to be taxed as an S corporation, consider the adoption of an agreement to preserve S corporation status.

XI. Tax Issues.

A. Determine whether the corporation will make an S corporation election.

1. If an S corporation election is to be made, verify that the corporation will meet the eligibility requirements.

2. Arrange for the timely filing of the necessary election and consents.

3. Review the checklist of tax issues to be considered upon the creation of a corporation that is contained in Ch 10.

XII. Employee Benefits.

A. Consider what types of employee benefits the corporation will provide to its officers and rank and file employees.

B. Consider whether the corporation will have a qualified retirement plan.

XIII. Other Professionals.

A. Obtain names and addresses of the corporation's other professional advisors.

B. Other professional advisors include certified public accountants and insurance agents.