By Fernando Berrocal
The northwestern state of Washington bordered on the west by the Pacific Ocean, Oregon to the south, and Canada to the north was added to the Union in 1889. Olympia is the state capital but its largest and most important city is Seattle.
The benefit of the corporate form of business is that it has restricted responsibility and certain rights, privileges, and obligations that are not available to individuals. Doing business as a company might result in tax or financial advantages. Corporations can be founded on a for-profit or a nonprofit purpose. Certain record-keeping requirements and adherence to "corporate formalities" are required while forming and managing a corporation. Because a business categorized under section C of the Internal Revenue Code (a “C-Corporation”) is taxed on its revenue at the corporate level, and its shareholders are taxed on any dividends issued, forming a C-Corporation can have potentially negative tax consequences.
Choose a Corporate Name
Because your startup name may have a big impact on how your products and services are marketed, you should pick it carefully. If you use a business name that is too similar to another one or trademark, you might be sued. A small selection of resources is provided below to assist you in your search for a company name and to help you avoid names that are already in use.
- Look up the names of corporations, limited liability companies, limited partnerships, and limited liability partnerships that have previously been registered in Washington in the Secretary of State database.
- Search up the names of corporations that have already been registered in the Department of Revenue's database.
- Look for trademarks that have been registered with the United States Patent and Trademark Office.
- Search for trade names that have previously been approved by the Department of Licensing.
- You may also search for trademarks registered in Washington State by contacting the Corporations Division of the Secretary of State's Office.
Requirements to Name a Corporation
The state of Washington has some criteria for your business's name:
- The words "corporation," "incorporated," "company," or "limited," as well as the abbreviations "corp.," "inc.," "co.," or "ltd," must appear in a business's name.
- A corporation's name must be distinct from the names of any other businesses in the state.
- RCW 23B.04.010 is the statute that applies.
To serve on the Board of Directors, elect a Director or Directors
A corporation must have at least one director under Washington law. Unless the articles of incorporation or bylaws specify otherwise, a director does not have to be a resident of Washington or a shareholder of the corporation. The number of directors who will make up the board of directors should be determined by the articles of incorporation or the corporation's bylaws. Initially, directors are assigned to the post, but shareholders elect them in the following years.
The corporation's activities are overseen by the Board of Directors. The Board of Directors is responsible for governing the startup by setting broad policies and objectives, as well as approving specific corporate operations and transactions.
The Articles of Incorporation must be filed
The articles of incorporation serve as the corporation's constitution. The document is usually short and straightforward, and you may create your own in just a few minutes by filling out the form on the Secretary of State's website. In most cases, all of the founding shareholders can create and sign the articles themselves, or they can select one person to do so. The articles of incorporation must include the following information, as stated in RCW 23B.02.020:
- A corporate name for the corporation.
- The quantity and type of shares that the company is allowed to issue.
- The incorporation's effective date.
- The duration of the company's existence.
- The name of the corporation's original registered agent and the street address of the corporation's initial registered office.
- Each incorporator's name and address.
The articles of incorporation, along with the required filing fees, must be filed with the Secretary of State. Unless a later effective date is specified, a corporation's existence begins when the Secretary of State files its certificate of formation. A certificate of formation's delayed effective date cannot be more than 90 days after it is submitted.
Request a Federal Employer Identification Number (EIN)
Any business that hires workers or functions as a corporation needs an EIN. The following publication provides further information about Federal Employee Identification Numbers: http://www.irs.ustreas.gov/pub/irs-pdf/p1635.pdf
Create a set of Corporate Bylaws
The number of directors and corporate officials, the method for selecting and dismissing directors, the protocols for director and shareholder meetings, and the requirements for preserving corporate records are all covered by corporate bylaws. If the bylaws do not specify differently, certain default requirements apply, as stated in RCW 23B.02.060. The incorporators or board of directors of a corporation must approve the corporation's first bylaws.
Unless the articles of incorporation don't need a board of directors, the articles of incorporation or bylaws must either indicate the number of directors or the method by which the number of directors will be determined.
Corporations must create their bylaws and keep a record of them, but they are not required to file them with the secretary of state. Bylaws can be modified without the need to file formal modifications.
Make a Shareholder Agreement
A shareholder buyout agreement is a contract between co-owners of a business that specifies the conditions for selling stock if one of the owners quits for any reason, such as retirement or death. In the case of a buyout, the agreement also specifies a process for valuing the shares. Furthermore, the shareholders might incorporate clauses in the agreement that cover the shareholders' other rights and responsibilities.
A shareholder agreement is not needed, but it is recommended as a means to safeguard shareholders in the event of a change in corporate control.
A buyout agreement generally specifies what events would cause a buyout, whether a shareholder must be bought out by the other shareholders, who may acquire a leaving shareholder's shares and the amount that must be paid for the shares. The buyout clauses in the shareholder agreement might be added.
Meeting of the Board of Directors - After Incorporation:
- If the articles of incorporation designate first directors, the initial directors must hold an organizational meeting to complete the startup's formation by electing officers, adopting bylaws, and conducting any other business that comes before the meeting.
- If the articles do not designate initial directors, the incorporator or incorporators must conduct an organizational meeting to:
- Elect directors and complete the corporation's formation; or
- Elect a board of directors to complete the corporation's organization. 23B.02.050 RCW.
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