Benefits of a Corporation
Forming a corporation helps protect its owners’ personal assets. If a corporation is sued or cannot meet its financial obligations, the corporation’s shareholders only risk the amount of money they invested in the business. Their homes, cars, personal bank accounts and other assets are protected from the corporation’s creditors. There may also be tax benefits to forming a corporation.
Requirements for Incorporating in the District of Columbia
Preparing Your Articles of Incorporation
To form a corporation, you must file articles of incorporation with the Department of Consumer and Regulatory Affairs and pay a filing fee. The corporation’s existence begins when the articles are filed. The articles of incorporation must, at a minimum, contain the following information:
- Name of the corporation
- Details about the corporation’s stock structure
- Registered agent
- Names and addresses of incorporators
In regards to the stock structure, the following requirements apply:
- The articles of incorporation must list the number of shares the corporation is authorized to issue.
- A corporation can have more than one type of stock, these are called stock classes or series. For example, one type of stock may offer voting rights while another doesn’t. If there is more than one class or series of shares, the articles must list each class or series. For each class or series, the articles must state the number of authorized shares and a distinguishing designation. Before shares are issued in any class or series, the articles must state the terms of the shares in that class or series, including the limitations, preferences and relative rights of the shares.
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Naming Your Corporation
Before filing articles of incorporation, you should make sure your proposed corporation name is available in the District of Columbia. You can check name availability by conducting a search on the Department of Consumer and Regulatory Affairs website. You can reserve a name for 120 days by submitting an application to the Department of Consumer and Regulatory Affairs. Your corporation name must meet the following requirements:
- A corporation’s name must contain one of these words or abbreviations: “corporation,” “incorporated,” “company,” “limited,” “corp.,” “inc.,” “co.” or “ltd.”
- A corporation’s name must be distinguishable from the name of any other entity formed or authorized to do business in the District of Columbia or from any reserved or registered name on file with the Department of Consumer and Regulatory Affairs.
An incorporator’s main responsibility is to sign and file the articles of incorporation. The incorporators’ names and addresses must be listed in the articles. When specifying incorporators, you must adhere to the following requirements:
- A corporation must have at least one incorporator.
- An incorporator must be a person.
If the articles of incorporation do not list the corporation’s initial directors, the incorporators must elect directors. The incorporators may also adopt bylaws. The incorporators then have no further responsibilities.
The board of directors focuses on the corporation’s long-range issues, setting policies and strategies. Because directors have a fiduciary duty to the corporation, they must always act in the best interests of the corporation and its shareholders.
When specifying directors, your corporation must meet the following requirements:
- The board of directors must have at least one director.
- There is no prescribed maximum number of directors, but the articles of incorporation or bylaws should establish the number of directors.
- Either the articles or the bylaws create eligibility requirements for directors. Directors do not have to be shareholders or District of Columbia residents unless the articles or bylaws require it.
Specifying a Registered Agent
A corporation’s registered agent receives lawsuits, notices and demands that are served on the corporation and forwards them to the corporation. The registered agent for your corporation must meet the following requirements:
- A registered agent must have a physical street address within the District of Columbia.
- A registered agent may be a person or entity that has registered as a commercial registered agent. An agent may also be one of three types of noncommercial registered agent: an individual or entity, a person who holds a particular job title at an entity that acts as agent, or a member of the District of Columbia Bar who maintains an office in the District of Columbia.
- An entity can act as its own registered agent by appointing a person at the entity to serve as agent.
Stating a Corporate Purpose
Every corporation’s purpose must be to engage in lawful business. The articles of incorporation do not need to specify any additional purpose.
Determining Incorporation Bylaws
Bylaws are a corporation’s internal rules and procedures. They are kept at the corporation’s principal offices and are not filed with the Department of Consumer and Regulatory Affairs. Bylaws include provisions for managing the corporation’s business and affairs. They may include such items as the number and term of directors, the duties of officers, the way reports are made to shareholders and the way shareholder meetings are conducted.
The following are requirements for corporation bylaws in the District of Columbia:
- The directors or incorporators must adopt bylaws.
- Bylaws must be consistent with the law and the articles of incorporation.
Costs of Incorporating in the District of Columbia
The District of Columbia Department of Consumer and Regulatory Affairs requires a fee when filing articles of incorporation or reserving a corporation name. Corporations are also required to pay state and federal income taxes.
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