Legal Question in Business Law in California

Re: Incorporating businesses for others

Howdy:

The incorporator...the person who completes and submits the Articles of Incorporation or Articles of Organization (for an LLC) doesn't have to be a founder in the corp, a director, or otherwise participatory in the business.

Attorneys routinely draft and file Articles for business they have no interest in...that's part of the "business formation" field of law.

Companies that take filing orders online are basically law firms. Many, like those based in Nevada, will not only draft and file Articles of Incorporation, but will also act as a Registered Agent in the State...for a fee, of course.

Unless you're drafting your own Articles of Incorporation or Articles of Organization, you need to be an attorney.

Online firms will draft and file the Articles; but then they leave you stranded. While they may supply boilerplate bylaws, they provide little, if any, support for holding the initial shareholders' meeting; the organizational meeting of the Board of Directors; electing the permanent Board and appointing officers; and the many other tasks that are required in properly getting the business going.

Most of us practicioners do.

Hope this helped.

Re: Incorporating businesses for others

A corporation can be formed by anyone. The person who forms it signs the Articles of Incorporation as the 'Incorporator." Unless the name of the new corporation has already been reserved for someone's use, the Secretary of State does not care who acts as the incorporator. As a business attorney, I form corporations frequently as incorporator. I do so on the instruction of clients, but I could also form them to 'warehouse' them for future use if I thought there were a need to do so worth investing the time and fees.

In short, the act of forming a corporation as an incorporator does not require anyone's permission unless a name reservation is involved.

It would be a different story if the Articles of Incorporation designated (as they often do) initial directors without those persons' permission. Anyone named in the Articles as an initial director MUST SIGN the Articles personally and failure to sign will result in rejection of the Articles by the Sec. of State.

This discussion pertains to California. I have done incorporations in a few other states, and the laws and procedures do tend to vary, so local inquiry is always necessary.

By the way, once the attorney-incorporator or other person doing the incorporation has completed his role, he should submit a letter to the corporation thus formed, resigning and turning over all authority to the corporation's directors-designate.

Preparing, executing and filing the Articles of Incorporation gets way too much emphasis; it is a necessary step but just the tip of the iceberg in forming a corporation. The founders' responsibilities go much further, and that is why people who form 'real' corporations for 'serious business' retain experienced attorneys rather than relying upon fixed-fee incorporation services. With the exception of subsidiaries of existing corporations, which might find use of an incorporation service satisfactory, I'll bet the one-year 'disappearance rate' of service-formed corporations is five times that for attorney-formed corporations.