Thursday, August 23, 2007

Starting a corporation

The law require three things for starting a corporation:

1. Corporate by-laws.
2. Articles of Incorporation.
3. An Employer Identification Number.

I suggest a fourth is necessary from the business side of things: a business plan.

How to get these things done? First, option has you doing all the work. You cna find corporate by-laws online by just googling the term. Indiana Secretary of State has a online method ff starting new companies here. You can go to and get a EIN number. You will also be trying to get your business up and running at the same time. And what is an incorporator? Why do you need a resident agent?

You can go with a company who may or may not employ a lawyer, offering low cost incorporations in Delaware or somewhere exotic for some very low fee. I am not sure I understand the allure of these companies. Your corporation will be governed by the laws of the state in which you incorporated and you will be in Indiana. What happens if a question comes up about the corporations law in this other state? Either you find an Indiana lawyer licensed in that other state and knowledgeable about the other state's corporations law, or you hire an attorney in that other state.

I have said for many years that the reason for lawyers is so that people like you do not spend your time in a courthouse. The same idea applies here. What makes life easier for us in a business start up situation. You will find it a more efficient use of your time to turn over to a lawyer the tasks of getting the Articles of Incorporation done and getting the EIN number. Just as if you have downloaded those corporate by-laws and read them can lead to more efficiently using the attorney's time. (By the way, let me say that my view is that online bylaws are only good as a starting point. Think of the difference between wholesale and retail. Online bylaws epitomize wholesale when what you need is not only retail but tailored work. Bad bylaws pose a grave danger to any corporation.)

Having an attorney on hand at the start can get you through the meeting of incorporators and first meeting of the corporation so that the corporation begins its life in full legal propriety.

And why is all this so important? Erroneously setting up the corporation can rob the shareholders of what they wanted: protection from personal liability.