I Just Filed the Certificate of Incorporation . . . Is My Business Ready to Go?

Not quite. Filing the Certificate of Incorporation is the first of several steps towards setting up and running a legitimate business corporation. In a previous blog post, I discussed the basics of avoiding personal liability when it comes to running an LLC or corporation. What follows after filing the certificate of incorporation, helps to protect against exposing yourself to liability and lays the foundation for a successful venture, should you decide to start your own business. For the purposes of this post, I'll cover the basics of what comes after you file the initial organizing documentation for your corporation.

The Certificate of Incorporation covers the simple basics of your company: the name, purpose, county where the corporate office will be located, amount of common shares, incorporator information and the address for where legal papers can be mailed. This is the quickest and easiest step in the process and can be filed electronically in a matter of minutes. Once the corporation is filed, it's important that you secure an Employer Identification Number ("EIN") with the IRS. An EIN serves multiple purposes and acts as a social security number for your business, especially for tax purposes.

Organizational Meeting

Once you've secured an EIN, the organizers/incorporators, i.e., the individuals that set up the company, must hold the first organizational meeting. Fortunately, if all the the incorporators are in agreement, there doesn't actually have to be a physical meeting, so long as everything that is discussed and decided is put in writing. At this meeting, the incorporators will typically elect a board of directors (which, for a small corporation may be the same people who are the incorporators) who will serve until the first shareholders meeting, adopt by-laws and handle any other business that is necessary at that time.

The Board of Directors are responsible for making key decisions and setting the strategic direction of the company, while the by-laws set out the rules and procedures for how the corporation will operate. By-laws can cover voting, how board members are elected, procedures for resolving internal disputes, and the types of officer roles that will be appointed, etc. Most likely, the by-laws will be drafted prior to this organizational meeting, so the incorporators can simply vote to adopt them.

Initial Board of Directors Meeting

After the organizational meeting is complete, sometime thereafter the newly selected board of directors will hold their first meeting. Again, if you're running a small business, the directors could be the same people as the incorporators. Regardless, this meeting is an opportunity for the directors to make some key decisions related to the newly formed corporation. At a typical initial board meeting, the directors will: appoint corporate officers (e.g., President, CEO, Secretary, Treasurer, etc.), issue shares to shareholders, authorize the opening of corporate bank accounts, appoint a corporate accountant, authorize any rental or purchase agreements for office space, and adopt/authorize a shareholder agreement, etc.

Similar to the organizational meeting, if the board members are in agreement, this meeting does not have to be held in person and may be conducted in writing. Once this meeting has ended, the shares may be issued to shareholders and the organizational process is near completion

Employer Registration, Business Licenses, Insurance, Trademarks

Finally, if the corporation anticipates having employees, it must register with the New York State Department of Taxation & Finance and the New York State Department of Labor. Additionally, if the corporation's business requires a particular license or permit to operate, the corporation must file with New York State and New York City to secure those licenses and permits. The New York State government has created a convenient tool to utilize in determining which licenses and permits are required for your particular business.

Once you've filed with the Department of Labor and secured the necessary licenses, you will also need to obtain insurance policies for the corporation. Depending on your business, you will likely need general liability, unemployment compensation and a number of other insurance agreements. Finally, you may want to consider filing a trademark for your business with the United States Patent & Trademark office, to secure your rights related to your business products or services.

While this is certainly a simplified version of the total process, this explanation provides the basic backbone of setting up a corporation properly. Although filing the certificate of incorporation is the first step in this process, it is certainly not the last. At a minimum, following this framework will guide you in the right direction towards protecting your rights and the rights of the corporation.

Disclaimer: This blog post and similar posts are not to be considered as providing legal advice. The discussion here is meant for educational and informational purposes only and shall not create an attorney-client relationship with the readers of this content.