Once the decision is made to incorporate, the next step is to form the corporation. At one level it is quite simple to form a corporation--just fill out the Articles of Incorporation form. What is complicated, however, is how to go about completing the Articles of Incorporation form. Here is a basic explanation as to what is required by the Articles of Incorporation form and what it all really means.
Existence.A corporation's existence begins when a certificate of incorporation is issued by the Secretary of State. This is the final step in a process that begins when one or more incorporators sign and deliver the Articles of Incorporation, together with the statutory filing fee to the Corporations Division. Any individual who is at least 18 years old may act as an incorporator. He or she is not required to be a Vermont resident.
The Articles of Incorporation must contain certain information, including the corporation's name, the street address of the registered office, the name and address of the registered agent, information concerning shares of stock the corporation will be authorized to issue, and the name and address of each incorporator.
The Articles of Incorporation may be completed by using the form available for that purpose or another document giving the same information. Upon filing of your Articles of Incorporation, the Corporations Division will review the filing to ensure that all necessary information has been included, and that certain statutory standards have been met. If the document is complete, a certificate of incorporation will be issued and your corporation's existence begins.
Corporate NameThe corporation needs a name. Any name will do, as long as it is not the same or similar to, or likely to be confused with, another corporation or business name already registered with the Corporations Division. If the proposed name is the same or similar, then the law requires that the proposed name be rejected in favor of the already registered name. It is a mistake to invest in signs, letterhead, or other emblems using a proposed name before the Corporations Division issues the certificate of incorporation. You may be disappointed by not getting the first name you want, but it will be especially upsetting if you have spent money on signs or letterhead which can't be used because your first choice of names is already registered. Also, the name must end with the word "corporation", "incorporated", "company", "limited" or an abbreviation of these words.
"Blackacre Incorporated" or "Greenacre, Inc." or "Happy Fields, Ltd." are corporate names in an appropriate format.
You can do your own informal name search here. Simply go to the Corporations Division webpage, click on Corporations Database Search, and then click on Keyword Search. Type in the name you want and see what comes up!
You may reserve a corporate name for a period of 120 days by filing an application for that purpose and paying a fee. Once your name has been reserved, the reservation my be renewed twice. A corporation can operate under a trade name. For example, "Greenacre, Inc. doing business as Drury Lane Associates".
Registered Office and AgentThe Articles of Incorporation must include the name and address of the corporation's registered agent in Vermont. A corporation's registered agent is the person who accepts service of process of lawsuit papers on behalf of the corporation. If someone sues the corporation, the papers are given or "served" to the agent. The agent must then let the president or other officer of the corporation know that the corporation is being sued. While no one likes to be the one who accepts lawsuit papers, it is important to remember that the registered agent is acting on behalf of the corporation, and in accepting the papers the registered agent is not being sued personally. Any Vermont resident or any legally registered corporation in Vermont may be designated as a registered agent. The agent does not have to be an employee, shareholder, or board of director of the corporation.
The registered agent's address must be a street address. The registered office may be the same address as any of the corporation's places of business in Vermont. The agent may be an individual who resides in Vermont and whose business office is identical with the registered office; or a registered business or nonprofit, foreign or domestic corporation in good standing, having a business address that is identical with that of the registered office.
Whenever the registered agent, the agent's address, or the address of the registered office changes, a statement of change of agent or office must be filed with the Corporations Division.
Fiscal YearThe Articles of Incorporation require that the corporation's fiscal year be stated. The fiscal year is important to the Corporations Division because every corporation is required to file an annual report with the Corporations Division within two and one-half months after the end of the corporation's fiscal year. Note that there are accounting and tax implications to consider when deciding what a corporation's fiscal year should be.
If no fiscal year is stated in the Articles of Incorporation, then a fiscal year of January 1 through December 31 will be assigned to the corporation.
Number and Class of SharesThe shares of stock in a corporation represent a person's ownership interest in the corporation. The Articles of Incorporation must set forth the number of authorized shares, and the class or classes of shares. At a minimum, this includes: (a) one or more classes of shares that together have unlimited voting rights (like common shares); and (b) one or more classes of shares (which may be the same class or classes as those with voting rights) that together are entitled to receive the net assets of the corporation upon dissolution. Other than this, the decision as to how many shares to authorize, and how many to issue, is one that depends upon how many owners there will be, and whether cash or other property will be used to pay for the shares.
A corporation may not issue shares in an amount greater than what it is authorized to issue in its Articles of Incorporation. If a corporation changes its mind and wishes to issue more shares than the Articles of Incorporation allows, it may amend its Articles of Incorporation to permit additional shares to be issued.
Corporate PurposeThe corporate purpose may, but need not, be specified in the Articles of Incorporation. Unless the Articles of Incorporation limits the purpose of the corporation, the corporation will be authorized to engage in any lawful business. Some businesses are regulated by specific state agencies and require prior approval from those agencies before a corporation is formed. For example, banks, savings and loan associations, credit unions, other financial institutions, and insurance companies must be approved by the Department of Banking, Insurance, Securities, and Health Care Administration before a new corporation is formed. Railroad companies must be approved by the Transportation Board, and utility companies by the Public Service Board.
DirectorsEither the Articles of Incorporation or the corporation's bylaws must establish a board of directors consisting of at least three directors (unless the corporation is a Close corporation that does not have a board of directors). However, if the corporation has fewer than three shareholders, the corporation must have as many directors as it has shareholders.
A director must be an individual, but he or she is not required to be a resident of Vermont unless the Articles or Incorporation or the corporate bylaws require residency. A director does not have to be a shareholder of the corporation.
While the Articles of Incorporation form allows the initial board of directors to be listed, this information is not required. Some corporations list it to establish a public record of the initial board of directors.
You may choose to include additional information, such as provisions relating to management and regulation of the affairs of the corporation, and provisions that define, limit or regulate the powers of the corporation, its board of directors or its shareholders.