A corporation protects your personal assets from liability for your business’s debts and obligations. It also helps protect you personally if someone sues one of your business partners or employees. There may also be other advantages to incorporating your business, such as tax savings and increased appeal to investors.
Preparing Your Certificate of Incorporation
A corporation is formed when a certificate of incorporation, along with the appropriate filing fee, is filed with the New York Department of State. The certificate of incorporation must contain the following:
- Name of the corporation
- Names and addresses of incorporators
- Address for registered agent
- Corporate purpose
- County in which the corporation’s offices will be located
- Stock structure
A corporation can offer different types of stock, called classes or series. These classes can offer different rights to their shareholders, for example some classes of stock may offer voting rights while others do not. Regarding stock structure, the follow applies:
Regarding stock structure, the following information must also be included:
- The certificate of incorporation must state the total number of shares and if they have a par value. You can sell shares without a par value at any price, but shares with a par value cannot be sold at a price that is less than the stated value.
- New York’s standard certificate of incorporation form provides for 200 shares at no par value, and most New York corporations are formed with this stock structure. If you choose this structure, you will pay a $10 tax upon filing the certificate of incorporation. If you choose a different stock structure, your tax may be higher.
Naming Your Corporation
Prior to filing your certificate of incorporation, you should check to make sure that your desired corporate name is available, which you can do by using a free entity name check service or by writing to the New York Department of State and paying a fee for each name searched.
A corporate name can be reserved for 60 days by filing the appropriate application with the New York Department of State. Two 60-day extensions are available on written request.
When choosing your corporation’s name, you must meet the following requirements:
- A New York corporation’s name must contain the words “incorporated,” “corporation” or “limited,” or the abbreviations “inc.,” “corp.” or “ltd.”
- Your corporation’s name must be distinguishable from the name of any corporation, limited liability company or limited partnership already on file with the Department of State.
- Your corporation’s name cannot contain words prohibited by Section 301(a)(1) of the Business Corporation Law of New York State.
New York requires that certificates of incorporation include a list of the person or persons who are filing for incorporation. The following requirements apply when specifying incorporators:
- There must be at least one incorporator.
- An incorporator must be an individual who is 18 or older.
- The incorporators must sign and file the certificate of incorporation and type or print their names and addresses.
- The incorporators must then hold an organizational meeting to adopt bylaws, elect directors and transact any other business of the corporation. Once directors have been chosen, the incorporators have no further duties.
Corporate directors determine corporate policies and strategies and are responsible for implementing them. Directors are fiduciaries, which means they must always act in the best interests of the corporation and its shareholders.
You must adhere to the following requirements when specifying directors for your corporation:
- There must be at least one director. There is no maximum number of directors.
- Directors must be at least 18 years old.
- The certificate of incorporation or bylaws can impose other restrictions on who is eligible to be a director.
Specifying a Registered Agent
A registered agent is a person or entity who receives official correspondence, such as lawsuits or other legal documents, on behalf of the corporation. Unlike other states, New York requires a corporation to designate the Secretary of State as its agent for service of process. You must provide an address in the United States to which the Secretary of State can send copies of any documents it receives.
Stating a Corporate Purpose
In most cases, you can state your corporation’s purpose in general terms to allow for the greatest possible flexibility. New York has a standard certificate of incorporation form that contains a general corporate purpose clause: “This corporation is formed to engage in any lawful act or activity for which a corporation may be organized under the Business Corporation Law, provided that it is not formed to engage in any act or activity requiring the consent or approval of any state official, department, board, agency or other body without such consent or approval first being obtained.”
Determining Incorporation Bylaws
A corporation’s bylaws outline the internal rules and procedures that the corporation will operate under. Bylaws typically include such information as the number of officers and directors and how they are chosen, a description of any corporate committees, how meetings of directors and shareholders are held, and what sort of shares are authorized.
Bylaws are not required at the time of incorporation, but after a corporation has been established, the incorporators must meet to adopt bylaws. Bylaws are kept at the corporation’s principal place of business and are not filed with the Department of State.
Costs of Incorporating in New York
The New York Department of State requires a fee when filing articles of incorporation or reserving a corporation name. Corporations are also required to pay state and federal income taxes.