There are two constitutional documents required when setting up a corporation in any U.S. state:
A third document that can be drawn up in a corporation is the shareholder agreement, which is not compulsory under state law.
When you set up a business as a corporation for the first time, it is a requirement for most states that you file the corporation's articles of incorporation. This document represents a charter that confirms your corporation’s existence in the state where your corporation is based. It is submitted in the form of a single document at your Secretary of State's office and includes the basic operating features of your corporation. Once you have filed the document and it has been approved, you have legally created your corporation as a valid registered business in the state.
The following information has to be included in the document:
Normally, the articles of incorporation will identify by name the incorporators of your corporation who have initiated the process of incorporation and are usually responsible for the signing of the articles of incorporation before the document is filed with the state. If the articles of incorporation have named the director(s), they may need to sign the articles of incorporation document before it can be submitted.
When your articles of incorporation have been prepared, you will need to pay the required filing fee with your document.
The cost of this may vary depending on whether you are forming a for-profit or nonprofit corporation. It does not take too much work, which is likely to cost less.
In many situations, once a corporation has filed its articles of incorporation, it is by default managed completely by the shareholder-elected directors and by the officers who have been appointed by the director(s) and are consequently supervised by them. Typically, what is called a shareholder agreement permits the corporation’s shareholders to alter that default and the shareholders are given the power to supervise and manage the corporation to the degree that has been reached in the agreement. The agreement could permit shareholder consent to make alterations to the corporation’s constating documents, any allotment or issuance of shares, the sale or purchase of real property, and any decisions that are normally left to the corporation’s directors where there is no unanimous shareholder agreement present.
As well as restricting the corporation’s directors’ powers or laying out how shareholders may vote, there are other crucial issues that can be addressed in a shareholder agreement, as follows:
A corporation is not required to have a shareholder agreement, but due to the flexibility of this document and what it can include, it is in the interest of shareholders to legalize such an agreement so as to protect their rights and the success of the corporation. Depending solely on articles of incorporation and bylaws is an unwieldy method for running a modern-day corporation.
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