You are currently viewing So You’ve Incorporated… Now What?

So You’ve Incorporated… Now What?

So You’ve Incorporated…
Now What?

Congratulations! You’ve recently filed your articles of incorporation and your attorney has told you that, yup, you now officially have a corporation. Great, you think. Now what?

First, Some Terminology

Founders. The people who started the company. This is not really a legal term, so it doesn’t tell you much about their current rights in the company – just that they got the ball rolling. Usually in the early phases of a startup, a founder will be an officer, such as the CEO, and be a member of the board of directors.

Shareholders. These are people who own shares of stock in the corporation. A founder will usually own a majority of the stock so that they retain control of the company. 

Board of Directors. These are the decisionmakers. Their names and addresses are listed on the certificate of formation that was filed with the state to form your company. Board members have legal obligations to make decisions in the best interest of the company and abide by the company’s governing documents. They are required to meet regularly, keep minutes of their meetings, and endeavor to make a profit for their shareholders. 

Officers. While the board of directors meets regularly and answers to the shareholders, officers handle the day-to-day operation of the company. Officer positions are usually created by the corporate bylaws and filled by a board election. The officers answer to the board, and the board answers to the shareholders.

Bylaws. These are the rules for running the company. Among other things, they’ll say what decisions can be made by the board and what decisions need to be voted on by shareholders. They’ll also include requirements such how often the board has to meet, how officers are selected, etc.  Hopefully you’ve worked with a lawyer to draft your bylaws so you understand and can abide by them.

Your First Board Meeting

As soon as your corporation has been formed, your board should get together for an organizational meeting as soon as possible and take the following actions:

  1. Ratify the acts of the incorporator.

The incorporator is the person — often an attorney — who filed your articles of incorporation. One of your first acts as a board should be to ratify (or essentially, approve) that act of filing and paying the necessary fees, so that in the eyes of the law, the company itself took those actions.

  1. Adopt the bylaws.

Even though your counsel has probably drafted up your bylaws already, they’re not officially the rules of the company until the board of directors votes to approve them. So your board should vote on that, first thing! Make sure you record the vote in your meeting minutes.

  1. Elect officers.

Select your CEO, CFO, and whatever other positions your bylaws require or authorize. Make sure  you record the vote, just as you’re recording all the board’s actions in your meeting minutes.

  1. Prepare a minute book.

When running a corporation, clear and organized recordkeeping is vital. At each meeting, someone designated the secretary needs to take notes that document the board’s discussions and any actions taken. These minutes will then be reviewed and approved by the board at the next meeting and added to a minute book.

This minute book may be physical — such as a three-ring binder — or it can be stored electronically. In addition to the minutes of every meeting, the minute book should also include the company formation documents and documentation or all board and shareholder actions.

5. Handle other business.

As the board, you should discuss and make a plan to address any other logistics or administrative business for the company. For example, if you have not already done so, you’ll need to apply for an EIN. You’ll need that before you can open a company bank account. You’ll also need to authorize a person or people on the board to sign for that bank account. 

  1. Issue shares.

Being on the board does not necessarily mean you own any interest in the company. A corporation is owned by its shareholders, and until the board issues shares of stock, there are no shareholders. A solo founder might purchase all the shares for herself, but If there are multiple founders, you’ll need to come to an agreement about what percentage of the company each person will hold. Each founder should consider hiring his or her own attorney to represent their individual interest in that process, as the attorney who formed your company likely represents the company as a whole, not any individual founder.

Want to know more?

You can read more about some of the legal requirements in the Business Organizations Code, which governs corporations in Texas:

Sec. 21.059 Organizational Meeting
Sect 3.202 Issuing Stock Certificates