If you’re incorporating your business, the incorporator’s statement is often a crucial part of the process. Find out what the incorporator’s statement is, and why it’s so important.
In most states where you file your business for incorporation, you (or the incorporator) will be required to file the certificate of incorporation with the state. After that, the incorporators must call a meeting. The main goals of this meeting are 1) to elect the initial board of directors, and 2) to adopt the bylaws of the corporation you’ve formed.
Once the meeting is done and everything’s been agreed upon, the incorporators then create the incorporator’s statement. This document records all the actions taken in the meeting (the minutes of the meeting), and all the incorporators then sign the document. This document is then filed in the minute book of the corporation, and the control over the corporation passes from the incorporators to the board of directors.
Defining the Terms
Understanding what the incorporator’s statement really means is best if you understand all the terms that have been used so far to explain it. Here are some basic definitions of some the terms:
The incorporators are those who incorporate the business, by filing the forms required by the state and paying the fees. Some states require at least 3 incorporators, so you won’t be able to do this on your own.
The incorporators aren’t always the same people who actually own the business. In the old days, many businesses simply hired a lawyer to act as their incorporator. These days, you can pay a lot less by using an online incorporation service. You generally want professionals to do the job so you know that it will be done correctly and efficiently.
Certificate of Incorporation
This is what the incorporator files with the state to start the incorporation process. This certificate of incorporation generally contains the information that the state demands. In most cases, that means it contains:
- The corporation name
- The nature of the corporation
- The nature of the business that the corporation will engage in
- The name and address of the registered agent
- The amount of stock and the type of stock issued
- The names of the incorporators
Board of Directors
This is the governing body of the corporation, chosen and elected by the stockholders. In many cases, the officers in the corporation also act as members of the board of directors. But there may be directors from outside the company, acting as advisors.
The main role of the board of directors is to manage the corporation. They make the major decisions for the company, while they also appoint and supervise the officers who run the day-to-day operations for the corporation.
These are the internal rules that govern the management of the corporation. These rules can cover issues such as:
- How the members of the board of directors are elected
- How stock certificates are issued and transferred
- The appointment of committees
- Defining the duties of various corporate officers
- Listing the permitted business activities in which the corporation will engage in
What Else Happens in That Organizational Meeting?
In the meeting where the incorporators sign the incorporator’s statement, you designate the board of directors and then put your bylaws in writing. That way, you have your rules written down, to avoid any misunderstandings on how things are done in the corporation.
During this meeting, you’ll want all the people there to check over the corporate documents and make sure that everything’s on the up and up.
At this point, you should also finalize the salaries and benefits for the officers of the company. Keep in mind that these are the people that will now run the corporation on a daily basis.
All the actions and decisions made during this meeting should be accurately recorded and filed securely. This is always crucial for any corporate meeting, but especially so for this first meeting. Everything else stems from this moment on.
Why Is the Incorporator’s Statement Crucial?
The incorporator exists because, technically, the corporation doesn’t exist yet. It will only exist when the board of directors has been established. That’s why there are incorporators—they act on behalf of the corporation before it exists so that it will exist. The incorporator can sign off on official documents. They can also make sure that the corporation is set up that it can conduct its business in such a way that it complies with the state regulations.
The incorporator’s statement is crucial because it makes the corporation official.
- It contains the written resignation of all the incorporators, as these incorporators have all signed the document.
- It lists down all the names of the initial members of the board of directors. That means the control over the corporation passes over to these people, who will then sign off on all pertinent documents and make all the major decisions.
- It also names the appointed director of the corporation.
- The date is also recorded in the statement.
What Does the Incorporator’s Statement Look Like?
Here’s an example of what it will look like:
ACTION IN WRITING
The undersigned, being the sole incorporator of [COMPANY], INC. (“Corporation”), a corporation organized under Minnesota Statutes, does hereby take the following action in writing in lieu of a meeting pursuant to Minnesota Statutes.
INITIAL BOARD OF DIRECTORS
[List of names of members of the board of directors]
RESOLVED, that the following named person be appointed the Director of the Corporation to serve until his successor is duly elected and qualified:
At first glance, the incorporator’s statement looks too simple and short. It’s not really all that complicated. But it’s still a necessary step for your new corporation. The directors can only officially take charge over the leadership of the corporation after the incorporators sign this document.
That’s why it’s crucial that you have the right incorporators in place. They can make sure that the corporate setup is compliant, that the incorporation process goes smoothly, and that the incorporator’s statement is made and signed in the end.