The Role of an Incorporator or Organizer in Business Formation

What Is an Incorporator?

An incorporator is responsible for setting up a corporation. This role is primarily executed before the business is formed, with the incorporator taking key steps to ensure that the corporation is eventually recognized legally. The incorporator must sign the corporation's articles of incorporation before filing with the state in which the corporation is registered.

The articles of incorporation (known in some states as a "certificate of incorporation" or a "certificate of formation") serves as a charter recognizing the corporation's formation. This document may also state the corporation's purpose.

Articles of incorporation are typically filed with the Office of the Secretary of State in the corporation's selected state of formation. Once completed and officially recognized, this document becomes a matter of public record.

When signing the articles of incorporation, the incorporator must include a valid address. If a separate corporation serves as incorporator, its representative must highlight the corporation's name and the state in which it is presently incorporated. In some states, the person signing on behalf of a corporation must also mention his or her role at that corporation.

Depending on the corporation and the state in which it is formed, the incorporator may serve a variety of important roles. In states that abide by the Model Business Corporation Act (MBCA), incorporators must review all of the statute's provisions and determine whether the corporation's articles are compliant. Only upon verifying compliance can incorporators sign and submit the document. Ideally, only a legal expert will analyze the articles of incorporation for compliance.

Upon filing the articles of incorporation, the incorporator can lead an organizational meeting. Typically, three days' notice must be provided before holding this meeting. The purpose of this gathering could be to:

• amend the articles of incorporation (followed by an official notice to the state, especially if the registered agent changes);
• draft and adopt bylaws; or
• elect members to the board of directors.

The incorporator is by no means the only person allowed to lead early organizational meetings; the director can also take on this responsibility. This is just one example of the extent to which degrees of involvement can vary for incorporators at different businesses.

Once the articles of incorporation are approved by the Secretary of State, the incorporator may receive a copy of the document. Later, the incorporator may be involved in the licensure process. In some states, for example, any corporations applying for licensure must submit the names of all incorporators alongside a copy of the articles of incorporation.

Who Is Allowed to Serve as Incorporator?

A wide variety of individuals and organizations are allowed to take on the role of incorporator. The only consistent requirement is that the incorporator must be aged 18 or above.

While any adult can technically serve as an incorporator, it is rarely wise to choose a friend or business associate for this job. Instead, many aspiring business owners prefer for entity formation companies to take on this role. Not only do these services tend to be more reliable than friends or family members, but they provide the expertise needed to ensure full compliance. An ordinary individual, although capable of providing his or her signature, may not be able to tell whether a corporation's articles of incorporation actually comply with local laws.

Some incorporators retain their title after gaining legal recognition for the business in question. This is typically not necessary, however, as all of the incorporator's duties end once the business is registered. Often, incorporators resign after they have provided necessary signatures and completed associated paperwork. This final step can easily be accomplished by contacting the Secretary of State and requesting resignation or removal as incorporator.

What Is an Action of Incorporator?

A common legal document in Delaware and California (and occasionally used in other states), the "action of incorporator" document officially announces the adoption of a corporation's bylaws. Signed by the incorporator, this document also verifies that specific individuals have been elected to the corporation's initial board of directors. These original board members may be replaced after their successors have been elected.

What Is a Promoter?

In some contexts, the person or company that fulfills the role of incorporator or organizer is referred to as 'promoter.' In most states, however, the terms 'incorporator' and 'organizer' are preferred.

What Is an Organizer? When Is One Necessary?

Organizers resemble incorporators in many respects. Rather than providing signatures and filing paperwork for corporations, organizers serve limited liability companies (LLCs). Their duties may include:

• reviewing articles of organization (which generally resemble articles of incorporation) to ensure compliance;
• signing a certificate of organization or articles of organization; and
• signing an operating agreement, which dictates how the organization is run. This form often resembles corporate bylaws.

Individuals acting as organizer must submit their full name and address alongside their signature within the articles of organization. In some states, these legal forms allow each organizer to include their phone number alongside their name and address.

In addition to fulfilling the duties outlined above, the organizer can act as a registered agent—the official contact who receives annual filing information and other official correspondence. The registered agent may also receive the service of process for a subpoena or lawsuit.

Who Can Serve as Organizer?

As with incorporators, many individuals or companies can serve as organizer. The one main requirement is that the organizer must be at least 18 years of age. In most cases, a 'natural person' or business (such as a corporation, partnership, or other LLC) may act as organizer.

Organizers, like incorporators, are often representatives from entity formation companies. These representatives bring a trained eye to articles of organization. As mentioned earlier, they offer greater reliability and are willing to include contact information alongside their signature. This information ultimately becomes available for public viewing.

Why Are Organizers and Incorporators Important?

Organizers and incorporators do not exist to merely provide a signature. While their signature paves the path to recognition from the state, it represents so much more.

Incorporators closely analyze articles of incorporation (or organization) and other key legal documents. They only sign once they feel fully confident that the information contained therein is true. Their expertise allows them to catch compliance issues or other easy-to-miss problems. This is a huge responsibility—and it should not be entrusted to just anybody.

What Is the Model Business Corporation Act, and How Does It Apply to Organizers and Incorporators?

Prepared by the American Bar Association's Committee on Corporate Laws of the Section of Business Law and followed in 24 states, the Model Business Corporation Act (MBCA) shapes standards for American corporate law. In respect to incorporators and organizers, the MBCA sets specific requirements for filing procedures. For example, the MBCA requires that all incorporators include their name and address alongside their signature in the articles of incorporation. Additionally, the incorporator must pay a fee when submitting the articles of incorporation.

Incorporator and Organizer Requirements in Different States

The incorporation and LLC formation process varies somewhat from one state to the next. Variations also exist for incorporator and organizer duties, although both roles fulfill the same general function in most states. The aforementioned MBCA offers a semblance of unity, but has yet to be adopted in several states.

In every state, organizers and incorporators must review articles of organization (or incorporation) and provide both their signature and address. Occasionally, however, states may also require incorporators or organizers to submit their phone number.

Additional information about incorporation or LLC organization can be found in most states' statutes. This information may also be available through the Secretary of State. Because procedures can vary so significantly between states, it is worth your while to examine state statutes, or better yet, work with a formation company familiar with local requirements.

Important Considerations When Choosing an Incorporator or Organizer

As you select an incorporator or organizer, keep in mind that this person plays an important and time-sensitive role in business formation. Your incorporator may determine whether your corporation is successfully registered in your state. He or she serves as your final defense against rejected articles of incorporation.

After you have drafted your corporation's articles of incorporation or LLC's articles of organization, your selected incorporator may find instances in which the legal document does not conform to state requirements. The incorporator can quickly alert you to these issues, giving you a chance to change the document before it is rejected.

Another key consideration to keep in mind as you select your company's incorporator or organizer is that, while it is technically possible to select any individual aged 18 or older, this approach can prove disastrous. It is nearly always better to work with an outside party—ideally a formation company. This outside expert can patiently guide you through multiple elements of the business formation process while ensuring that your business is fully compliant with local statutes.