Prior to Conducting Business – Organizational Meeting
As noted above, a corporation is formed when the incorporator files the Articles of Incorporation. Once the corporation is formed, the incorporator or the initial directors must hold an organizational meeting (which need not be held in Washington) to adopt the Bylaws and issue stock. The shareholders then elect or confirm the board of directors, who in turn appoints the officers. In order to ensure the timely filing of the Initial Report, the organizational meeting should be held within 120 days after the Articles of Incorporation are filed. These actions may also be taken by written consent.
Initial Report – In addition, an initial report, which contains much of the information determined at the organizational meeting, must be filed with the Secretary of State within 120 days after the Articles of Incorporation are filed. If the initial report is not timely filed, the Secretary of State will automatically dissolve the corporation.
Bylaws – Bylaws are the corporation’s rules for internal management that must be adopted by the incorporators or initial directors. The content usually includes:
· The time and place of shareholders’ meetings and the rules governing the meetings;
· The number of directors and rules for electing them;
· The time and place of directors’ meetings and the rules governing the meetings;
· The duties of officers;
· The rules for amending the Bylaws.
Directors and Officers – Except as allowed by RCW 23B.08.010, a corporation is required to have a board of directors under Washington law. Directors may be compensated for their role as directors, and their obligations are to the corporation as a whole. Acting as a board, the directors have a general duty to manage the affairs of the corporation, appoint officers, and make recommendations to the shareholders for decisions reserved to a shareholder vote. Under Washington law, they are considered fiduciaries to the corporation with a duty to use due care, and they are prohibited from self-interested dealing at the expense of the corporation. Officers are delegated authority from the board to manage the day-to-day operations of the corporation as specified in the Bylaws. Directors and officers do not need to be residents of Washington or shareholders of the corporation.
Issuance of Stock – Stock must be issued by resolution of the board of directors. It can be issued in different classes, with each class having different voting powers or payment preferences. In exchange for stock, the corporation is permitted to receive cash, property, contribution of labor or services, promissory notes, and promises of future services. Stock certificates can be issued but are not required. Unlike in foreign jurisdictions, capitalization is not a requirement of the corporate formation process; however, sufficient capitalization is necessary before conducting any business because it is a requirement of maintaining limited liability status. If the corporation incurs liability without properly capitalizing through stock issuances, its shareholder may be personally liable for those liabilities.
Federal Employer Identification Number (EIN) – Although an EIN is not required to form a corporation, under federal law, a corporation must obtain one prior to hiring any employees or opening a United States bank account. The most efficient way to obtain an EIN is via the Internal Revenue Service website (available at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online), and requires a United States address for the corporation and an officer with a United States social security number.
Initial Report – In addition, an initial report, which contains much of the information determined at the organizational meeting, must be filed with the Secretary of State within 120 days after the Articles of Incorporation are filed. If the initial report is not timely filed, the Secretary of State will automatically dissolve the corporation.
Bylaws – Bylaws are the corporation’s rules for internal management that must be adopted by the incorporators or initial directors. The content usually includes:
· The time and place of shareholders’ meetings and the rules governing the meetings;
· The number of directors and rules for electing them;
· The time and place of directors’ meetings and the rules governing the meetings;
· The duties of officers;
· The rules for amending the Bylaws.
Directors and Officers – Except as allowed by RCW 23B.08.010, a corporation is required to have a board of directors under Washington law. Directors may be compensated for their role as directors, and their obligations are to the corporation as a whole. Acting as a board, the directors have a general duty to manage the affairs of the corporation, appoint officers, and make recommendations to the shareholders for decisions reserved to a shareholder vote. Under Washington law, they are considered fiduciaries to the corporation with a duty to use due care, and they are prohibited from self-interested dealing at the expense of the corporation. Officers are delegated authority from the board to manage the day-to-day operations of the corporation as specified in the Bylaws. Directors and officers do not need to be residents of Washington or shareholders of the corporation.
Issuance of Stock – Stock must be issued by resolution of the board of directors. It can be issued in different classes, with each class having different voting powers or payment preferences. In exchange for stock, the corporation is permitted to receive cash, property, contribution of labor or services, promissory notes, and promises of future services. Stock certificates can be issued but are not required. Unlike in foreign jurisdictions, capitalization is not a requirement of the corporate formation process; however, sufficient capitalization is necessary before conducting any business because it is a requirement of maintaining limited liability status. If the corporation incurs liability without properly capitalizing through stock issuances, its shareholder may be personally liable for those liabilities.
Federal Employer Identification Number (EIN) – Although an EIN is not required to form a corporation, under federal law, a corporation must obtain one prior to hiring any employees or opening a United States bank account. The most efficient way to obtain an EIN is via the Internal Revenue Service website (available at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online), and requires a United States address for the corporation and an officer with a United States social security number.