Benefits of a Corporation
When you form a corporation, you gain limited liability for the corporation’s actions and financial obligations. A corporation is legally separate from its owners, which means it has its own assets, can enter into contracts and can sue or be sued. Therefore, if a corporation is sued or has financial troubles, its owners’ personal assets are not at risk. Forming a corporation can add credibility to your business, increase appeal to investors and offer potential tax savings.
Requirements for Incorporating in Vermont
Preparing Your Articles of Incorporation
The first step in forming a Vermont corporation is to deliver articles of incorporation and a filing fee to the Secretary of State. The Secretary of State will then issue a certificate of incorporation, which begins the corporation’s existence. The articles of incorporation must, at a minimum, contain the following information:
- Name of the corporation
- Stock structure
- Names and addresses of incorporators
- Registered agent and registered office
When declaring the stock structure of your corporation, the articles of incorporation must specify the classes of shares, if any, and the number of authorized shares in each class. If there is more than one class of shares, the articles must provide a distinguishing designation for each class. Before shares in any class are issued, the articles must state the preferences, limitations and relative rights of that class of shares.
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Naming Your Corporation
You should do a preliminary search to find out if the corporate name you have chosen is available in Vermont. You can do this online at the Secretary of State’s website, by calling the Secretary of State’s office.
You can reserve a corporate name for 120 days by filing an application with the Secretary of State. Name reservations can be renewed twice.
Your corporation name must meet the following requirements:
- It must contain one of these words: “corporation,” “incorporated,” “company” or “limited,” or an abbreviation of one of those words.
- It cannot be the same as, similar to or likely to be confused with any other business name registered with the Vermont Secretary of State.
A person who completes and files the articles of incorporation with the Secretary of State is called an incorporator. The following requirements apply when specifying incorporators:
- Incorporators’ names and addresses must be listed in the articles of incorporation.
- A corporation may have one or more incorporators.
- An incorporator must be an individual who is at least 18 years old.
- If the articles of incorporation do not name initial directors, the incorporators must elect directors. They may also approve bylaws. Once the directors have been chosen, the incorporators have no further duties.
The duties of a corporation’s board of directors include protecting the assets and interests of the shareholders, enforcing the articles and bylaws and making sure the corporation is well managed. When specifying directors for your company, you must adhere to the following requirements:
- The board of directors must have at least one director. Although there is no other limit on the number of directors a corporation can have, the number should be included in either the articles of incorporation or bylaws.
- The articles of incorporation or bylaws may establish eligibility requirements for directors.
Specifying a Registered Agent and Registered Office
All corporations must have a registered office and a registered agent at that office. A registered agent receives service of lawsuits and notices and is responsible for forwarding these communications to the corporation.
When specifying a registered agent and registered office, you must meet the following requirements:
- The articles of incorporation must list the name of the registered agent and the physical street address in Vermont of the registered office. The registered agent’s business address must be identical to the registered office address.
- A registered agent may be an individual who resides in Vermont or a corporation that is legally registered in Vermont. The registered office may be the corporation’s place of business.
Stating a Corporate Purpose
You are not required to state a corporate purpose in your articles of incorporation. Unless you specify a more limited purpose, the purpose of your corporation will be to engage in any lawful business.
Determining Incorporation Bylaws
The bylaws define the powers, rights and responsibilities of a corporation and its directors, officers and shareholders. Bylaws also specify the rules and procedures the corporation will follow and include provisions for managing the corporation’s business and regulating its affairs.
When determining bylaws for your corporation, you must meet the following requirements:
- The directors or incorporators must adopt bylaws.
- Bylaws cannot include anything that is inconsistent with the law or the articles of incorporation.
Costs of Incorporating in Vermont
The Vermont Secretary 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.