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What Must I Do to Incorporate? Our 6 Steps to Take after Filing

Posted by Eric Anderson | Sep 27, 2019 | 0 Comments

There are several critical steps for incorporating a startup, but some business owners stop after they have filed the articles of incorporation with their secretary of state. If you have questions about incorporating your company, read on to learn six steps to take after filing:

LLC written on Golden Keyring.

  1. Appoint Directors

A corporation must have a board of directors (“BOD”) before it is technically valid,  In California, the minimum number of directors in a corporation is three, unless there are only one or two shareholders of record. If there are only one or two shareholders of record, the number of directors may be less than three but not less than the number of shareholders. If you have designated initial directors in the articles of incorporation, then you have already completed this step.

  1. Adopt Bylaws

In addition to drafting bylaws, you need to have board minutes that indicate the board of directors has adopted them. If your directors cannot come together for a meeting in person, a business attorney from Eric D. Anderson Law, LTD can help you draft a document that contains written consent of the BOD without a meeting.

  1. Get an EIN Number

According to the Internal Revenue Service, all businesses must have an Employer Identification Number, which is like a company's social security number. Your company will use the EIN number to manage its finances.

  1. Draft a Shareholders' Agreement

Although a shareholders' agreement is not technically a requirement for new incorporations, startups that have more than one founder should always draft a shareholders' agreement. This will prevent any co-founders from selling their shares to random individuals and will mandate what happens to the shares of a founder who dies or loses them to divorce or bankruptcy.

Even though a shareholders' agreement is not necessary in order to do business, potential investors like seeing that one is in place, and they may require you and the other founders to sign one before investing in the company.

  1. Issue Stock

In order to issue stock legally, you must meet several requirements. For example, the board needs to pass a resolution authorizing it first, and the corporation needs to issue stock certificates for the individual stocks.

  1. Consider Implementing a Vesting Schedule

Without a vesting schedule for the founders' stocks, founders will be able to keep all of their shares even if they die, become disabled, or leave the company. This could present serious problems if a founder keeps all of the initial shares but no longer contributes to the business in any meaningful way.

If you just started a company and want to ensure you are doing everything in your power to protect it from future lawsuits, contact us. We offer both a subscription service for our legal assistance and the more traditional hourly fee option. Call 909-283-5494 to speak with one of our Redlands commercial attorneys about your company's legal needs.

About the Author

Eric Anderson

Through his experience on both sides of the courtroom, Eric understands that any legal issue can be intimidating to those who do not know the law. Today he uses that experience to defend those in need of a champion. A former prosecutor and Deputy County Counsel, Mr. Anderson began his career w...

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