Once you’ve done the hard work and decided on your company’s mission and goals, and want to form your company, you’re thrust into a confusing new world. First things first, your articles. Your articles of incorporation are required for you to complete your business formation. You can only achieve legal recognition from the Secretary of State with the correctly completed articles. But when you begin developing your articles of organization or incorporation, you may consider who you want to serve as an organizer (or incorporator). The role is more crucial than you think and determines whether you can move forward with your new business or not.
The selection process is particularly crucial, and you may struggle to make this critical decision. We’ve compiled a guide for you, including everything you need to consider about the essential role organizers and incorporators play in the world of business formation.
What is an incorporator?
Many business owners have never even heard of an incorporator – an incorporator is responsible for creating a corporation. The incorporator signs the articles of incorporation before the filing takes place in the state where the corporation is to be registered. This is usually completed before the business formation as the incorporator completes key steps ensuring that the corporation will be recognized as legally legitimate.
The articles of incorporation, alternatively known as the ‘Certificate of Formation’ or ‘Certificate of Incorporation,’ are legal documents that serve as a charter for the corporation’s formation. The document can also cover the purpose of the corporation. Usually, the articles of incorporation are filed with the Secretary of State in the state where the corporation is located. Once recognized officially, the document is published for public viewing.
The incorporator must include an address when signing the articles of incorporation. Sometimes, corporation services may help. A representative can highlight the state and corporation’s names in this case. In some places, the company representative must also state their name and role in the corporation.
Depending on the state in which it is formed and the corporate structure, the incorporator may cover several crucial roles. Incorporators must review all legal provisions in states that follow the MBCA (Model Business Corporation Act) and determine whether the articles are in breach or compliant. Legal experts typically analyze the articles for compliance. Only once compliance is confirmed can the document be submitted by an incorporator. After filing the articles, the incorporator can hold an organizational meeting. Three business day’s notice is provided before holding the meeting, and the purpose usually includes:
- Drafting and adopting corporate bylaws
- Electing members of the Board of Directors
- Amending the articles (official notices will follow, particularly with registered agent changes)
The incorporator isn’t the only person leading such meetings; the Director can also do it. Once the Secretary of State verifies the articles, the incorporator receives a copy. Later, the incorporator may take part in the licensure process. In some places, corporations applying for licensure are required to submit the details of all incorporators (along with a copy of the articles of incorporation).
Who can be an incorporator?
The requirements for an incorporator aren’t strict; a wide range of people can take on the role. The only consistent legal requirement is that the incorporator must be an adult (18+). But you should be careful and avoid using a business associate, family member, or friend for it. Business formation companies may be better for this as they have the required expertise to avoid common mistakes and ensure complete compliance.
Your friend or co-worker probably won’t pick up on legal breaches in your articles of incorporation. Usually, incorporators will retain the title after gaining recognition for the business. This isn’t typically necessary, as all duties end once the registration is complete. Often, incorporators will immediately resign after providing the necessary paperwork and signatures. The last step can be accomplished by requesting removal from the Secretary of State.
What is an ‘Action of Incorporator’?
In some states, such as California and Delaware (among others), the ‘Action of Incorporator’ is a document that officially adopts corporate bylaws. Signed by the incorporator, the document verifies specific individuals that have been elected to the corporation’s Board of Directors. The original Board Members can resign and be replaced after their successors have been elected.
What is a promoter?
In limited contexts, the organizer or incorporator may be known as a ‘promoter.’ In most places, the term incorporator is used.
Is an organizer necessary?
Organizers and incorporators have substantial overlap, with the main difference being the business entity you’re setting up. Rather than providing signatures and assistance for corporations, organizers serve LLCs or Limited Liability Companies. Possible duties include:
- Signing articles for the organization
- Signing an operating agreement (dictating how an organization is run) resembles corporate bylaws
- Reviewing articles of organization (similar to articles of incorporation)
To act as an organizer, you must submit your address, full name, and signature in the articles of the organization. In some states, these forms include the organizer’s phone number.
In addition to the above duties, the organizer may act as a registered agent – the official contact who receives official correspondence and annual filling information. The registered agent could also receive legal documents such as the service of process for a lawsuit or subpoena.
Who can be an organizer?
Just like incorporators, most individuals can act as an organizer. The only non-negotiable requirement is that the organizer must be an adult (18+). In most cases, a business or individual may act as an organizer.
Organizers are often representatives from business formation services; these representatives bring experience to the formation process. They are more reliable than friends or colleagues.
Why are they important?
Incorporators and organizers do more than provide a signature; while the signature paves a path to state recognition, it represents other things. Incorporators can meticulously analyze the articles of organization (or incorporation) and other crucial legal documents. Their expertise allows them to catch compliance issues and easy mistakes that a layperson could miss.
The LLC formation and incorporation process varies slightly from state to state. The MBCA offers consistency but hasn’t been adopted in all states. Variations also exist for organizer/incorporator duties, though both have the same core role. In all states, incorporators and organizers must review the articles of incorporation (or organization) and provide their signature and address information. Occasionally, states can also require phone numbers.
The statutes in most states cover extra information about incorporation or LLC formation. This information is sometimes available via the Secretary of State. Because procedures can vary between states, it’s worth examining the statutes or working with a professional formation company.
How does the MBCA apply?
Prepared by the American Bar Association’s (ABA) committee for corporate laws in the business law section and followed in over 20 states, the MBCA covers standards for corporate law in America. The MCBA sets out specific best practice requirements for filing procedures. The MBCA requires all incorporators to include their address and full name alongside the signature in the articles.
The last word
When selecting an organizer or incorporator, you must keep in mind that they play a time-sensitive role in forming your business. Your incorporator can make the difference between successful registration in your state. They serve as your final hurdle before a rejected article of incorporation. Your incorporator may find flaws in your documents that require amendments before you can guarantee acceptance. It would be best to keep in mind that a formation expert is ideal or at least getting legal advice.
Filed under: Advice Columns