LEGAL FORMS - PAHRUMP
HOW DOES A CORPORATION REALLY WORK ? ?
Corporations are created, not born, with the legal status of a person. They are, in effect, created of legal age, in any state that the owners choose, have the ability to contract, make loans, make sales, pay expenses, etc. Although they obtain their own social security number (known as an electronic identification number), they have no social security taxes to pay for themselves because they are not physical persons. They do have the need to file tax returns, open checking accounts, have a headquarters, and the list goes on and on. The common difference between corporations and people, is that corporations have only one function, namely, to turn a profit for the stockholders. They are created by operation of law by their state of incorporation.
The process goes like this. One or more person(s) become(s) the incorporator(s). The Incorporator’s job is to get the necessary paperwork to the state to startup a corporation. When the state accepts the paperwork, the state files it and usually returns stamped copies of the paperwork, along with some type of Certificate of Incorporation, back to the Incorporator(s). The Incorporator(s) then appoint a temporary director or directors, usually one or more stockholders, to be managing directors until the first meeting of stockholders. Then the Incorporator(s) resign(s).
The appointed managing director(s) then hold an initial stockholder(s) meeting, and then the managing director(s) resign. At the initial stockholder meeting, the stockholder(s) then elect the director(s) of the corporation until the next annual stockholder(s) meeting where the next set of directors will be elected, and so on. A short time after the stockholder(s) initial meeting, then the newly appointed directors have an initial director(s) meeting to elect the officers who will actually run the corporation until the next annual meeting, and so on.
At the initial director(s) meeting, many decisions about how the corporation will be run are passed, the By-Laws are approved, perhaps a medical plan, education plan, legal plan, cafeteria plan or employee benefit plan, (not eating plan), are set up, who will act as depositories, accountants, attorneys, resident agents approval, dividend expectations, etc. The director(s) also decide when the fiscal year end will be, whether the corporation will be taxed with the aid of Subchapter "S" of the IRS code, and many other decisions about the direction the company will take.
This meeting is then adjourned until the next meeting, which at the very least should be once a year.
The benefits of being a stockholder of a corporation revolve around the corporate advantages of owning a company with limited liability of the owners, unlimited life, centralized management, and free transferability of shares(unless its owners elect to be a "close" corporation). The ongoing benefits and limitations of stockholder(s) are rights to dividends, a share of the assets at dissolution and usually a vote in the election of the directors who represent the Stockholder(s) interests in the corporation.
A corporation lives by the decisions of the director(s) and the management of the officers made at duly authorized and convened stockholder and director meetings. The Secretary’s job is to record and keep the records of these meetings and decisions to show that the officers were authorized by the Directors for the actions they took, and that the directors and officers are carrying out the wishes of the Stockholders.
Please Tell Me More Now - I'm ready to learn a lot more about these problems and what I can do for my Corporation, Not-For-Profit Corporation, or Limited Liability Company to protect the business and its' owners !!!!!
Why should I bother to document a new or existing company !
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