Corporations

Many corporations get their start through the efforts of a person called a promoter, who goes about developing and organizing a business venture. A promoter's efforts typically involve arranging the needed capital, or financing, using loans, money from investors, or the promoter's own money; assembling the people and assets (such as land, buildings, and leases) necessary to run the corporation; and fulfilling the legal requirements for forming the corporation.

A corporation cannot be automatically liable for obligations that a promoter incurred on its behalf. Technically, a corporation does not exist during a promoter's pre-incorporation activities. A promoter therefore cannot serve as a legal agent, who could bind a corporation to a contract. After formation, a corporation must somehow assent before it can be bound by an obligation that a promoter has made on its behalf. Usually, if a corporation gets the benefits of a promoter's contract, it will be treated as though it has assented to, and accepted, the contract.

The first question facing incorporators (those forming a corporation) is where to incorporate. The answer often depends on the type of corporation. Theoretically, both closely held and large public corporations may incorporate in any state. Small businesses operating in a single state usually incorporate in that state. Most large corporations select Delaware as their state of incorporation because of its sophistication in dealing with corporation law.

Incorporators then must follow the mechanics that are set forth in the state's statutes. Corporation statutes vary from state to state, but most require basically the same essentials in forming a corporation. Every statute requires incorporators to file a document, usually called the articles of incorporation, and pay a filing fee to the secretary of state's office, which reviews the filing. If the filing receives approval, the corporation is considered to have started existing on the date of the first filing.

The articles of incorporation typically must contain (1) the name of the corporation, which often must include an element like Company, Corporation, Incorporated, or Limited," and may not resemble too closely the names of other corporations in the state; (2) the length of time the corporation will exist, which can be perpetual or renewable; (3) the corporation's purpose, usually described as "any lawful business purpose"; (4) the number and types of shares that the corporation may issue and the rights and preferences of those shares; (5) the address of the corporation's registered office, which need not be the corporation's business office, and the registered agent at that office who can accept legal SERVICE OF PROCESS; (6) the number of directors and the names and addresses of the first directors; and (7) each incorporator's name and address.

A corporation's bylaws usually contain the rules for the actual running of the corporation. Bylaws normally are not filed with the SECRETARY OF STATE and are easier to amend than are the articles of incorporation. The bylaws should be complete enough so that corporate officers can rely on them to manage the corporation's affairs. The bylaws regulate the conduct of directors,

Proctor and Gamble president and CEO A.G. Lafley addresses shareholders at the company's annual meeting in 2002. A corporation's officers are responsible for running day-to-day business affairs and carrying out policies established by the directors.
AP/WIDE WORLD PHOTOS

officers, and shareholders and set forth rules governing internal affairs. They can include definitions of management's duties, as well as times, locations, and voting procedures for meetings that affect the corporation.