Understanding corporate structures

A corporation’s board of directors (LLCs will have a similar board) oversees the corporation. The board is initially designated by the person or people who set up the corporation. Board members then must be elected by shareholders. More information about a board, including the election process and terms, can be found in the corporation’s publicly accessible SEC filings.

A corporation’s officers run a company’s operations and report to the board of directors. Their titles typically include chief executive officer, chief financial officer and chief operating officer. It is common for officers to serve on the board of directors.

Shareholders own a portion of the corporation. States typically require corporations to hold annual shareholder meetings including elections for the board of directors. These meetings can last several days and can be quite elaborate, in the case of large corporations like Wal-Mart, or can be short and simple for smaller companies. In most situations, only shareholders may attend the meetings. But even one share in a corporation will give a shareholder the right to be there. Special meetings might be required to obtain shareholder approval for a re-organization, amendments to the articles of incorporation or the sale of assets.

Articles of incorporation

Articles of incorporation, or any incorporating documents, are public documents that provide basic information about the birth and structure of a corporation. The filing of this document, generally with the secretary of state, brings a corporation into existence.

Chartering authority

The laws governing the formation of a corporation are found in state statutes. This includes the requirements for becoming a corporation, the information that must be included in the articles of incorporation and where the papers must be filed.

Usually, a state’s secretary of state is responsible for handling incorporation records. In some states, a specific office exists to handle corporate records. For example, Delaware’s Division of Corporations is a part of the Department of State.

State of incorporation

Corporations select their state of incorporation based on a variety of factors; there is nothing unusual about incorporating in a state where a company does not do much business.

Delaware is an especially popular site for companies incorporating, including many of America’s largest corporations. Delaware’s appeal is attributed to flexible corporate laws, a business-friendly government and a court system that is experienced in corporate matters. In litigation, a corporation’s state of incorporation can be a factor in determining whether a court has jurisdiction to bring it into court and deciding which state’s laws apply.

Despite the benefits or drawbacks of incorporating in a particular state, some corporations prefer to simply incorporate in the state of their headquarters or a state where they actively do business.

For publicly traded corporations, which are required to report to the SEC, the state of incorporation is listed in the corporations basic profile on EDGAR. EDGAR (found at www.sec.gov/edgar) is a free online database of all SEC filings, searchable by company name and stock ticker.

Information in articles of incorporation

The public information that a corporation must give in order to incorporate varies by state, but typical requirements include:

· business name

· names of people forming the corporation

· names of members of the board of directors

· the purpose for which the corporation is being established

· whether it is for-profit or non-profit

· amount of stock to be issued, if any

· location of headquarters

· registered agent in state to whom legal papers can be delivered.

A registered agent is anyone or any business that a corporation designates to receive its legal papers when being sued — something most states require corporations to do to make it easier for plaintiffs to sue them.

Amendments to articles of incorporation

Corporations are allowed to amend their articles of incorporation. While the original articles are useful, they might not give an accurate picture of the company’s current structure. Amendments will show changes in the company’s basic structure.

Accessing articles of incorporation

Access to articles of incorporation differs by state. In some states, the public can view scans of the original documents online. Other states post some or all the information from the articles online, but not the actual documents. In other states, you might need to make a formal request, pay a fee or visit the secretary of state’s office to view the full document.