The Corporate Records Handbook
Meetings, Minutes & Resolutions
- Product Details
- Notice of Meeting
- Shareholder Proxy
- Minutes of Annual Shareholders’ Meeting
- Minutes of Annual Directors’ Meeting
- Waiver of Notice of Meeting, and
- Written Consent to Action Without Meeting.
- elect S corporation tax status
- adopt pension and profit-sharing plans
- set up employee benefit plans
- amend articles and bylaws
- borrow or lend money
- authorize bank loans
- authorize a corporate line of credit
- purchase or lease a company car
- and more!
- About the Author
- Table of Contents
- Organize Your Corporate Records
- Your State Corporate Filing Office
- Looking Up the Law Yourself
- Three Ways to Document Formal Corporate Decisions
- Questions and Answers About Meetings, Minutes, and Written Consents
- Overview of Corporate Meetings
- Steps to Hold a Meeting
- Step 1. Call and Provide Notice of the Meeting
- Step 2. Prepare Your Agenda
- Step 3. Prepare Your Resolutions in Advance
- Step 4. Gather for Your Meeting
- Step 5. Hold a Virtual Meeting
- Step 6. Appoint a Chairperson and Secretary
- Step 7. Calling the Meeting to Order
- Step 8. Do You Have a Quorum?
- Step 9. Approve Minutes From Last Meeting
- Step 10. Reports by Officers and Committees
- Step 11. Introduce and Discuss Specific Proposals
- Step 12. Take the Votes of Directors or Shareholders
- Step 13. Handle Unfinished Business
- Step 14. Adjourn the Meeting
- Preparing Minutes for Annual Shareholders’ Meetings
- Preparing Minutes for Special Shareholders’ Meetings
- Choosing the Correct Minutes Form
- Preparing Minutes for Annual Directors’ Meetings
- Preparing Minutes for Special Directors’ Meetings
- When Is It Appropriate to Hold a Paper Meeting?
- How to Prepare Minutes for Paper Meetings
- Step 1. Check Your Bylaws for Your Written Consent Rules
- Step 2. Prepare the Written Consent Form
- Step 3. Place Signed Consent Forms in Your Corporate Records Book
- When to Use Business Corporate Resolutions
- Bank Account Resolutions
- Resolution to Adopt Assumed or Fictitious Business Name
- Resolution to Approve a Contract
- Real Property Resolutions
- Authorization or Ratification of Employee’s Authority
- Certification, Affidavit, or Acknowledgment of Corporate Decision Making or Document
- S Corporation Tax Election
- Accumulation of Earnings
- Section 1244 Stock Plan
- Resolution for Approval of Independent Audit
- Selection of Corporate Tax Year
- Resolution for Payment and Deduction of Corporate Organizational Costs
- Decide Whether to Amend Articles or Bylaws
- Amending Your Articles of Incorporation
- Amending Your Bylaws
- Hiring and Paying Corporate Employees
- Using Independent Contractors
- Appointing and Paying Corporate Officers
- Compensation for Attending Meetings
- Approval of Indemnification for Corporate Directors, Officers, and Employees
- Approval of Business Between the Corporation and Its Directors
- Resolutions to Approve Director Conflict of Interest Transactions
- Resolutions for Shareholder Approval
- When to Use Corporate Loan Resolutions
- Loans by Banks and Other Lending Institutions
- Loans by Shareholders and Other Insiders
- Promissory Notes Overview
- Sample Promissory Note Forms
- Insider Loan Restrictions Under State Law
- Tax Considerations and Consequences of Insider Loans
- Resolution for Approval of Corporate Loan to Insider
- Supporting Documentation—Promissory Notes
- Release of Promissory Note
- Introduction to Employee Fringe Benefits
- Group Health, Accident, and Disability Insurance
- Resolution Authorizing Group Term Life Insurance
- Payment of Employee Automobile Expenses
- Payment of Meals and Lodging
- Resolution Authorizing Business Expenses With Corporate Credit or Charge Card
- Reimbursement of Employee Business Expenses
- Resolution Approving Stock Bonus or Stock Option Plan
- How to Use This Chapter
- Overview of Corporate Retirement Plans
- Resolutions to Adopt Retirement Plans
- Stock Dividend Rules
- Stock Dividend Resolutions
- Legal and Tax Issues Affecting Stock Issuance
- Stock Issuance Resolutions
- How to Find the Right Lawyer
- Finding the Right Tax Adviser
- How to Do Your Own Legal Research
- Editing RTFs
- List of Forms Available on the Nolo Website
- How to Find Your State’s Websites for Corporate Filing and Tax Information
- How to Find Your State’s Business Corporations Act Online
- Sample Chapter
- articles of incorporation
- bylaws
- minutes of the first directors’ meeting
- stock certificate stubs or a stock transfer ledger showing the names and addresses of your shareholders, as well as the number and types of shares owned by each
- minutes of annual and special meetings of directors or shareholders, if any, and
- written consents.
- Limited liability. Corporate directors, officers, and shareholders usually are not personally liable for the debts of the corporation. This means that if the corporation cannot pay its debts or other financial obligations, creditors cannot usually seize or sell a corporate investor’s home, car, or other personal assets.
- Business taxes and flexibility. A corporation is a separate taxable entity. Business income can be sheltered in the corporation among the owner-employees as they see fit to reduce their overall tax liability.
- Employee fringe benefits. Owner- employees of a corporation are eligible for deductible fringe benefits, such as sick pay, group term life insurance, accident and health insurance, reimbursement of medical expenses, and disability insurance. • Commercial loans and capital investment. Lending institutions often give the risk- conscious corporate lender special preferences. Corporations can decide to raise capital by making a public offering of their shares.
- Business credibility. Corporations have an air of reputability about them. In other words, although placing an “Inc.” after your name will not directly increase sales, it forces you to pay serious attention to the structure and organization of your business, something that is likely to improve all aspects of your business.
- Perpetual existence. A corporation has an independent legal existence that continues despite changeovers in management or ownership. Of course, like any business, a corporation can be terminated by the mutual consent of the owners.
- Access to capital. Private and public capital markets prefer the corporate form over all other business forms, giving the corporation enhanced access to private and public capital. Public offerings can be made by means of a traditionally underwritten initial public offering (IPO) or a direct public offering (DPO) of shares by the corporation itself to its client or customer base.
- the beginning tax elections made by the corporation—for example, the selection of the corporation’s accounting period and tax year
- details of the corporation’s first stock issuance
- approval of stock certificates and a corporate seal, and
- approval of other beginning business of the corporation, such as the opening of a corporate bank account.
- Check your state’s corporate filing office website. Many states provide an online version of their business corporation act (or similarly titled corporation laws). Appendix B provides information on how to find your state corporate filing office website.
- Type “<your state’s name> Corporation Act” or “<your state’s name> corporation laws” into your browser’s search box. This usually leads to a link to your state’s business corporation act.
- Visit a local law library, a law school library that is open to the public, or a large public library with a substantial business collection. Ask the research librarian for help looking up your state’s business corporation act.
- Find more tips on looking up your state’s corporations laws using Nolo’s Laws and Legal Research page at www.nolo.com/legal-research.
- Forms
Incorporating your business is an important first step in obtaining limited liability status. To keep that status, you must observe a number of legal formalities, including holding and documenting shareholder and director meetings.
Meeting minutes are the primary paper trail of a corporation’s legal life—and The Corporate Records Handbook provides all the instructions and forms you need to prepare them. Minutes forms include:
You’ll also find more than 75 additional resolutions that let you:
“This practical guide gives step-by-step instructions plus the legal forms to be filled out and filed to keep corporate status.”—Orange County Register
“Should be part of any serious business library—and any corporate library.”—Bookwatch
Notice and Minutes Forms
Meeting Summary Sheet
Call of Meeting
Meeting Participant List
Notice of Meeting
Acknowledgment of Receipt of Notice of Meeting Proxy
Certification of Mailing
Minutes of the Annual Meeting of Shareholders
Minutes of Special Meeting of Shareholders
Minutes of Annual Meeting of Directors
Minutes of Special Meeting of Directors
Waiver of Notice of Meeting
Approval of Corporate Minutes by Directors or Shareholders
Cover Letter for Approval of Minutes of Paper Meeting
Written Consent to Action Without Meeting
Standard Corporate Business Resolutions
Authorization of Treasurer to Open and Use Accounts
Authorization of Treasurer to Open and Use Specific Corporate Account(s)
Authorization of Corporate Account and Designation of Authorized Signers
Authorization of Rental of Safe Deposit Box
Adoption of Assumed Name
Board Approval of Proposed Contract
Approval of Lease
Purchase of Real Property
Authorization of Sale of Real Property
Delegation of Authority to Corporate Employee
Director Ratification of Employee’s Acts
Board Ratification of Contract
Rescission of Authority of Employee
Shareholder Ratification of Decisions or Acts
Certification of Board or Shareholder Action
Affidavit of Corporate Decision Making
Acknowledgment
Corporate Tax Resolutions
S Corporation Tax Election
S Corporation Shareholders’ Agreement
Accumulation of Corporate Earnings
Qualification of Shares Under Internal Revenue Code Section 1244
Approval of Independent Audit of Corporate Financial Records
Approval of Corporate Tax Year
Payment and Deduction of Organizational Expenses
Resolutions to Amend Corporate Articles and Bylaws
Approval of Amendment to Articles of Incorporation
Approval of Restatement of Articles of Incorporation
Amendment of Articles Form
Approval of Amendment of Bylaws
Corporate Hiring and Appointment Resolutions
Approval of Hiring of Corporate Employee
Approval of Bonuses and Salary Increases
Shareholder Ratification of Employee Pay
Approval of Independent Contractor Services
Appointment of Corporate Officers
Authorization of Payment for Attending Meetings
Annual Director or Officer Stipend for Attendance at Meetings
No Compensation for Attending Corporate Meetings
Indemnification and Insurance for Directors and Officers
Director Conflict-of-Interest Resolutions
Board Approval of Transaction Benefiting a Director
Directors’ Written Consent to Transaction Benefiting a Director
Shareholder Approval of Transaction Benefiting a Director
Shareholder Written Consent to Transaction Involving a Director
Resolutions for Loans to the Corporation
Authorization of Loan at Specific Terms
Authorization of Maximum Loan on General Terms
Unlimited Authorization of Loans for Business Needs
Authorization of Line of Credit
Authorization of Line of Credit With Cap on Each Transaction
Authorization of Loan Terms Secured by Corporate Property
Resolution Approving Loan to Corporation
Promissory Note: Installment Payments of Principal and Interest (Amortized Loan)
Promissory Note: Installment Payments of Principal and Interest (Amortized Loan) Secured by -Corporate Property
Promissory Note: Installment Payments of Principal and Interest (Amortized Loan) With Balloon Payment
Promissory Note: Periodic Payments of Interest With Lump Sum Principal Payment
Promissory Note: Lump Sum Payment of Principal and Interest at Specified Date
Promissory Note: Lump Sum Payment of Principal and Interest on Demand by Noteholder
Promissory Note: Variable Schedule of Payments of Principal and Interest
Resolutions for Loans by the Corporation to Insiders
Approval of Corporate Loan to Insider
Promissory Note: Installment Payments of Principal and Interest (Amortized Loan)
Promissory Note: Installment Payments of Principal and Interest (Amortized Loan) Secured by Property
Promissory Note: Installment Payments of Principal and Interest (Amortized Loan) With Balloon Payment
Promissory Note: Periodic Payments of Interest With Lump Sum Principal Payment
Promissory Note: Lump Sum Payment of Principal and Interest at Specified Date
Promissory Note: Lump Sum Payment of Principal and Interest on Demand by Noteholder
Promissory Note: Variable Schedule of Payments of Principal and Interest
Release of Promissory Note
Employee Fringe Benefits and Business Expense Reimbursement Resolutions
Authorization of Group Health, Accident, or Disability Insurance for Employees
Adoption of Self-Insured Medical Reimbursement Plan
Purchase of Group Term Life Insurance
Authorization of Employee Death Benefit
Agreement Regarding Death Benefits
Purchase or Lease of Company Car
Authorization of Payment of Standard Mileage Allowance to Employees
Business Meal Expense Allotment for Employees
On-Premises Meals and Lodging to Employees
Authorization of Corporate Credit and Charge Cards for Employees
Reimbursement of Actual Travel and Entertainment Expenses to Employees Under Accountable Reimbursement Plan
Reimbursement of Actual Travel and Entertainment Expenses to Employees Under Nonaccountable Reimbursement Plan
Authorization of Per Diem Travel Allowance for Employees
Board Approval of Stock Bonus or Stock Option Plan
Corporate Retirement Plan Resolutions
Board of Directors’ Adoption of Retirement Plan
Board of Directors’ Adoption of Profit-Sharing Plan
Shareholder Ratification of Retirement Plan
Stock Dividend Resolutions
Declaration of Cash Dividend
Authorization of Cash Dividend Payable in Installments
Declaration of Year-End Dividend
Declaration of Regular and Extra Dividend
Declaration of Accumulated Dividend to Preferred Shareholders
Authorization of Property Dividend to Shareholders
Stock Issuance Resolutions
Approval of the Issuance of Shares
Sale and Issuance of Shares for Property
Sale and Issuance of Shares for Indebtedness Canceled
Sale and Issuance of Shares for Services
Sale and Issuance of Capital Stock for Assets and Liabilities of a Business
Bill of Sale and Agreement
Issuance of Shares in Exchange for Assignment of Trademark, Service Mark, Patent, or Copyright Assignment
Issuance of Shares in Return for Cash and Promissory Note
Introduction
1. Corporate Documents and Laws
2. Meetings, Minutes, and Written Consents—How to Document Corporate Action
3. Before You Hold Your Meeting—Prep Work and Notice
4. How to Hold a Directors’ or Shareholders’ Meeting
5. Preparing Minutes for Shareholders’ Meetings
6. Preparing Minutes for Directors’ Meetings
7. Paper Meetings
8. Action by Written Consent
9. Resolutions for Authorizing Business Transactions
10. Corporate Tax Resolutions
11. Resolutions for Amending Articles or Bylaws
12. Corporate Hiring and Appointment Resolutions
13. Conflict of Interest Resolutions
14. Resolutions for Loans to the Corporation
15. Resolutions for Loans to Insiders
16. Fringe Benefit and Reimbursement Resolutions
17. Retirement Plan Resolutions
18. Stock Dividend Resolutions
19. Stock Issuance Resolutions
20. Lawyers, Tax Specialists, and Legal Research
Appendixes
Appendix A: How to Use the Downloadable Forms on the Nolo Website
Appendix B: How to Locate State Corporate Filing Offices and State Laws Online
Index
Chapter 1:
Corporate Documents and Laws
Calling, providing notice for, holding, and voting at meetings of your directors and shareholders necessarily means becoming familiar with a bucketful of new terminology and procedures. While mastering this material isn’t difficult, it does require attention to detail. In this chapter, we provide legal and practical background information about basic corporate documents and the state corporation laws on which they are based.
If you are well organized and feel you understand the purpose of your articles, bylaws, and minutes, much of the material in this chapter, may seem like old hat. If so, you may wish to skip ahead to the next chapter where we present an overview of the common methods of corporate decision making, including corporate meetings and written consents.
Organize Your Corporate Records
Anyone who sets up a corporation needs to be able to quickly locate key organizational documents. Because these are really the constitution of your corporation, you’ll refer to them again and again. When using this book to produce corporate minute and consent forms, we will often refer you to these documents.
If you have not already done so, the best approach is to set up a corporate records book that contains the key documents. You can do this on your own with a three-ring binder or by using a customized corporate kit designed for the purpose.
Your corporate records book should contain:
If someone helped you incorporate, such as a lawyer, an accountant, a paralegal, or a financial planner, you probably received copies of these documents in a corporate records book, commonly called a corporate kit. However, some lawyers attempt to hold on to corporate records in the hope that you will have them take care of all ongoing technicalities. If so, you will need to request a copy of all corporate documents in your client file. (This is your property, so don’t take “No” for an answer.)
If you can’t locate a copy of your articles, write your secretary of state’s corporate filing office and request a certified or file-stamped copy of your articles. (See Appendix B for contact information.) It’s a good idea to call first so you can include the correct fee, which should be just a few dollars or so.
The Importance of Protecting Your Corporate Status |
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A corporation is a legal entity that is created and regulated by state laws. For legal, practical, and tax purposes, a corporation is legally separate from any of the people who own, control, manage, or operate it. If you want the advantages of having a corporation, you must follow legal requirements for running it. If you don’t abide by the rules, you could find your business stripped of its corporate status—and the benefits of that status, such as: |
Articles of Incorporation
The first key organizing document all small business corporations must have is their articles of incorporation. While most states use the term articles of incorporation to refer to the basic document creating the corporation, some states use the term certificate of incorporation. For example, Washington calls the document a certificate of formation, and Tennessee calls it a charter. A corporation comes into existence when its articles of incorporation are filed with the state corporate filing office. The articles normally contain fundamental structural information, such as the name of the corporation, names and addresses of its directors, its registered agent and his or her office address, and the corporation’s capital stock structure.
For the majority of small corporations, there is no other important information in this document. However, larger corporations sometimes adopt articles containing special provisions that impact future decisionmaking processes of the corporation.
Example: The Equity Investors Capital Corporation adopts articles that contain a multiclass stock structure consisting of Class A voting shares and Class B nonvoting shares. A special article requires a vote of two-thirds of each class of stock for the approval of amendments (future changes) to the corporation’s articles or bylaws.
RESOURCE
Where to get help preparing articles for a new corporation. If you have not yet formed your corporation, you can create and file your articles online through Nolo’s Online Corporation (see the Nolo website at www.nolo.com). Or, Nolo publishes several state-specific books and software that show you how to prepare and file articles and take other incorporation steps such as issuing stock under state securities laws. If you want to incorporate, see Incorporate Your Business (Nolo). You can also check your state’s corporate filing office online for samples and instructions for drafting your own articles. Except in South Carolina, you do not need to involve an attorney. (Appendix B has information on how to find the corporate filing office in your state.)
Bylaws
The bylaws of a corporation are its second-most important document. You do not file bylaws with the state—they are an internal document that contains rules for holding corporate meetings and other formalities according to state corporate laws.
Bylaws typically specify the frequency of regular meetings of directors and shareholders and the call, notice, quorum, and voting rules for each type of meeting. They usually contain the rules for setting up and delegating authority to special committees of the board, the rights of directors and shareholders to inspect the corporate records and books, the rights of directors and officers to insurance coverage or indemnification (reimbursement by the corporation for legal fees and judgments) in the event of lawsuits, plus a number of other standard legal provisions.
TIP
Use bylaws for common or changeable rules. State law often gives corporations a choice as to whether to place corporate operating rules and procedures in the articles of incorporation or bylaws. If you have a choice, it’s usually better to use the bylaws, because you can change them easily without the need for filing changes with the state. For example, many states allow you to place supermajority quorum or voting rules for directors’ or shareholders’ meetings in either document. If you use the bylaws for this purpose, you can more easily change these provisions because less stringent vote requirements normally apply to the amendment of bylaws. In contrast, if you need to change provisions in your articles, a formal amendment to the articles must be filed with your state’s corporate filing office.
Because the corporation laws of all states are subject to change, it’s possible that bylaws that were valid when adopted will later go out of date. Fortunately, major changes to corporate laws happen only every decade or two, when states modernize their corporate statutes. Nonetheless, if your corporation has been in existence for a few years and you plan a major corporate decision such as the issuance of a new class of shares, declaration of a dividend, or purchase of shares from a shareholder, it’s wise to make sure your bylaw provisions are up to date by checking your state’s current business corporation act.
RESOURCE
Where to get help preparing bylaws. Some corporations may have been formed in a hurry, by filing articles of incorporation only. If that is your case, you need to take the extra step of preparing basic bylaws for your corporation (see Incorporate Your Business (Nolo)).
Minutes of Your First Directors’ Meeting
When most businesses incorporate, they prepare minutes of the first meeting of the corporation’s board of directors or of the incorporators (the person or persons who signed and filed the articles on behalf of the corporation). This meeting is usually referred to as the organizational meeting of the corporation. Minutes are simply a formal record of the proceedings of a meeting. The organizational meeting is usually held to approve standard items of business necessary for a new corporation to begin doing business.
Look through the minutes of your organizational meeting. These minutes are designed to document the essential organizational actions taken by the board or the incorporators. They typically show:
Knowing some of this information may be essential to making informed corporate decisions later.
TIP
Don’t worry if you don’t have organizational minutes. Some corporations, especially those created in a rush, simply didn’t prepare minutes of the first meeting of the board of directors or incorporators. If you don’t have these minutes, you can re-create them as explained in “Using Paper Meetings to Create Records for Prior Undocumented Meetings,” in Chapter 7.
Records Showing Stock Was Issued
A new corporation issues stock to record the transfer of ownership interests in the corporation to the persons who invest in the corporation. Most smaller corporations issue stock for cash, property, or the performance of services that were rendered in forming the corporation. Many states prohibit the issuance of shares in return for a promise to pay for the shares later (in return for a promissory note) or for a promise to perform future services. If a small existing business is being incorporated, the business owners are normally issued shares in return for the transfer of business assets to the new corporation.
Example: Just Friends, a partnership, incorporates as Just Friends, Inc. Each of the three prior business owners owned an equal one-third interest in the partnership. After the transfer of the partnership assets to the corporation, each owner is issued one-third of the shares issued by the corporation (3,000 shares are issued, so each owner receives 1,000 shares in the new corporation).
If you haven’t issued stock or didn’t keep written records showing who owns shares, you should do so now. Stock certificates and stock transfer ledgers are available in most office supply stores.
Once you’ve organized your corporate records book, remember that while a corporate records book makes it easy for you to keep all key documents in one place, it won’t work unless you consistently use it.
Minutes of Meetings and Written Consents
If your corporation has been in existence for some time, you may have records of annual and perhaps special corporate meetings. This is especially likely if a lawyer helped you incorporate. Check your corporate records, or contact your attorney if you don’t have copies. Again, remember that you have a right to these records.
Your State Corporate Filing Office
Each state has a corporate filing office where you pay a fee and file paperwork for creating corporations, changing the corporate structure, and dissolving corporations.
Information on how to find your state corporate filing office is provided in Appendix B. The 50 different states use slightly different names for the office where corporate filings are made. Most commonly, corporations are formed with and supervised by the secretary of state or department of state office. The department within this bureaucracy that handles corporate filings is commonly designated as the corporations division or corporations department.
Corporation filing offices are sometimes further divided into offices that oversee special areas of concern, such as corporate filings (for example, articles of incorporation or amendments to articles), corporate name availability, corporate fee information, and corporate legal counsel. Don’t be put off by this seeming structural complexity. If you need information, check your state’s corporate filing office website. Also, you’ll normally find there is one phone number at the corporate filing office devoted to handling corporate inquiries from the public.
Throughout this book, we refer to the office that accepts corporate filings as the state corporate filing office, whether this office is formally designated as the secretary of state office or by some other title.
Your State’s Corporate Filing Office Website |
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Check your state’s corporate filing office website for sample forms and other useful information about forming or operating a corporation in your state. Most states have articles of incorporation and other forms that you can download or, in some cases, fill in and file online. Many of the state websites also contain links to your state’s corporate tax office (for tax forms and information) and state employment, licensing, and other agencies. See Appendix B for information about how to locate your state corporate filing office website. |
Looking Up the Law Yourself
In addition to the rules and procedures set out in corporate articles and bylaws, the organization and operation of a corporation are tightly regulated by a goodsized pile of laws adopted by each state. The primary source of laws that apply to your corporation will be found in your state’s corporation laws (statutes), often titled the Business Corporation Act or designated with a similar name. Legal citations to sections of a state’s business corporation laws are often listed in the following form: “Sec. 21.2 of the Business Corporation Act” or “Article 2-12, BCA.”
Some readers may be reluctant to venture into what they see as the musty or mysterious realm of corporate law research. To be sure, legal research of any type may seem daunting or dry, and corporate statutes are not always models of clear, concise (let alone friendly) language. Nonetheless, be reassured: Looking up corporate rules is not akin to doing your own appendectomy. Corporate statutes are organized by subject matter and are well indexed and crossreferenced. For the most part, the statutes themselves state a fairly simple rule or requirement that, despite the inevitable lawyer jargon, can be comprehended by the average reader.
Most small business people can’t afford to pay a lawyer upwards of $400 per hour every time they want access to basic legal information or help handling ongoing legal formalities and procedures. That’s why we explain the importance of locating an experienced small business lawyer who is willing to act more like a legal coach, rather than a legal representative. (See Chapter 20.) For now, it’s important to know that you can often look up the law yourself, without having to consult, and pay handsomely for, outside legal assistance.
Find Your State Corporation Laws
Many routine state legal rules, such as those for holding and voting at meetings, obtaining director or shareholder written consent to action without a meeting, and conducting ongoing corporate business, are restated in your articles of incorporation and bylaws. Nevertheless, there may be times when you will want more detail on your state’s corporation statutes.
Once you locate your state’s corporate statutes, it usually takes only a minute or two to find a relevant corporate law requirement or procedure, or to satisfy yourself that one does not exist.
The Model Business Corporation Act |
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The basic corporate statutes of many states contain the same, or quite similar, rules for organizing and operating business corporations. The reason for this uniformity is that a number of states have adopted some, most, or all of the provisions of a standard law: the Model Business Corporation Act. The act undergoes periodic changes, and states are free to enact it in modified form. |
To find your state’s corporation laws, you can use any of these four easy methods:
Look Up Relevant Corporate Statutes
To start, you can browse through the table of contents at the beginning of your state’s corporation act or the mini table of contents often located at the beginning of each section heading in the act. Each heading covers major areas of corporate operation or procedure (for example, Corporate Formation, Meetings, Stock Issuance, Corporate Officers, Records and Reports, and the like). Major headings are further broken down into subheadings and sections that treat specific matters, such as Articles of Incorporation, Bylaws, and Director and Shareholder Meetings.
Or, you can usually do a search to find the statute you’re interested in by entering a few key terms.
Check Other Laws
In addition to a state’s Business Corporation Act, other state laws regulate special areas of corporate activity. These include:
Securities Act or Blue Sky Law. These laws contain each state’s rules and procedures for offering, issuing, selling, and transferring shares of corporate stock and other securities. (The term blue sky law was derived from the sometimes underhanded, and often colorful, practices of corporate con artists who, in return for a small investment in their latest get-rich-quick undertaking, would promise the blue sky to unsuspecting investors. The securities laws of each state attempt, through stock offering qualification and disclosure requirements, to tone down the picture painted by stock promoters to a more realistic hue.)
Tax or Revenue Code. If a state imposes a corporate income or franchise tax, the state’s tax or revenue code will typically contain these provisions.
Commercial Code. The state’s commercial code contains the rules for entering into and enforcing commercial contracts, promissory notes, and other standard commercial documents.
Other state and local laws. Various state and local laws may impact the activities and operations of all businesses, whether or not they are incorporated. For example, state and local building codes, professional and occupation licensing, and other laws and regulations may apply to your business and its operations.
When to Consult a Professional
Holding corporate meetings and preparing standard resolutions and other corporate paperwork are usually routine tasks for small corporations. However, if the decision you are facing is complex, you anticipate any complications or objections, or you simply have questions and need more information, consult with a tax or legal specialist before using the forms in this book. A consultation of this sort will be far more cost-effective than making the wrong decision and having to fix it later. Besides, the fees you incur should be lower than you otherwise would pay, since you’re not handing all the paperwork to the lawyer or tax person to do for you. For information on choosing and using a legal or tax professional to help you with ongoing corporate decisions and documentation, see Chapter 20.
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