1. Articles of Incorporation. This document, which is also sometimes referred to as the Corporate Charter or Certificate of Incorporation, is the official document filed with the Corporate Filing Office (usually the secretary of state’s office). It sets out the basic organization and structure of the corporation. The required contents vary from state to state but usually include, at a minimum, the name of the corporation, the name and address of the incorporator, the name and address of the registered agent, and the stock structure of the corporation, that is, how many shares of stock are authorized to be issued.

   Optional provisions of the articles of incorporation may include such items as special stock structure for preferred shares of stock, the names of the initial directors, pre-emptive rights for shareholders and an indemnification clause for directors. Any changes made to the articles of incorporation must be approved by shareholders and filed with the state. Most Corporate Filing Offices have standard forms available for articles of incorporation.

2. Bylaws. This document is not filed with the Corporate Filing Office but is an essential document for the organization of the corporation. Bylaws contain the regulations and rules adopted by a corporation to govern its internal affairs. Bylaws provide the framework for conducting corporate business such as: requirements for holding meeting, voting requirements, quorum requirements, qualifications and appointment procedures for directors and officers, etc. The state corporation law provides the requirements for bylaws. Most bylaws are fairly standard but are important and should be read and understood by the officers, directors, and shareholders of the corporation.
3. Minutes of Organizational Meeting. Once Articles of Incorporation are filed with the Corporate Filing Office, the initial directors of the corporation should hold an organizational meeting. (If initial directors were not named in the Articles of Incorporation, then the incorporator can appoint initial directors by way of a Consent in Lieu of Corporate Meeting or by adopting a resolution for that purpose). The main business normally conducted at an organizational meeting includes the approval and ratification of the Articles of Incorporation, adoption of bylaws, the appointment of officers and the authorization for the issuance of shares of stock. Other business may also be conducted as needed.

   If all directors are in agreement, then the business of an organizational meeting can also be conducted by preparing a Consent in Lieu of Corporate Meeting document providing resolutions for the various items of business described in the paragraph above. The consent must be signed by all directors.

4. Stock Certificates. Shareholders own a corporation and stock certificates are evidence of their stock ownership. Certificates are not required in most states, but it is still considered good practice to issue certificates to help provide evidence of the organization of the corporation. From a purely practical point of view, people like to have something to show ownership and shares of stock provide that. However, the real authority for ownership of shares is a board of director’s resolution authorizing shares to be issued to a certain individual or entity.
5. Shareholder’s Agreement (optional). Some shareholders desire or need to enter into a more specific agreement concerning their relationship, especially with respect to the issues of what happens when a shareholder dies or decides to leave the business. Sometimes these issues are covered in the bylaws, but most often special provisions are set out in a separate agreement such as a Shareholder’s Agreement or a Buy-Sell Agreement. These documents may contain special procedures and requirements which must be followed if a shareholder dies or decides to leave the corporation and can also provide a formula or procedure for determining the value of shares.

For these reasons, it is generally not beneficial or realistic for smaller companies to attempt to go public. In the past few years, the reporting requirements for public companies have grown and require more legal and accounting expertise and expense.

One example is that public companies are now required to have independent board members (meaning they cannot be shareholders or have significant benefits in the company) and an independent auditing committee that oversees the company’s financial matters.

Due to the potential liability of being on the board of directors or on the audit committee, few people are willing to serve unless they are paid a substantial sum of money and are provided with liability insurance from the company.

Liability insurance for directors of a public company is expensive. Because of the many requirements placed upon public companies, some companies, which were once public companies, have opted to become private companies. When a business has grown substantially and has sufficient revenues, it might consider going public.

The benefits include the ability to sell stock to the public to raise money and it provides an exit strategy to the original shareholders or owners by giving them a way to cash out of the company. It also provides shareholders with a more liquid investment because there is a public market where they can sell their shares.