At Fidelity, we meet a lot of founders on the verge of incorporating their first company. Some agonize over decisions, get stumped on questions, and are not sure where to turn for help.
Most people only incorporate one or two companies in their lifetimes. However, registered agents, lawyers, and software companies like Fidelity see numerous incorporations every year. While you’re likely juggling building a product with the ins and outs of starting and growing a business, companies like Fidelity are focused on helping you successfully manage your corporate activities. Let’s just say we know a few things about incorporating. It can be worth it to educate yourself on these topics and making sure you understand the decisions you are making because the foundations you’re deciding on now will likely come up again and again in later financings, diligences, and other important events in the life of your company. Here’s a list of six things that can be worth taking the time to figure out. These decisions go into your company’s earliest documents—your Charter, Bylaws, and Sole Incorporator Consent.
And don’t forget—you’re never alone in incorporating. If you don’t know what to do, feel free to reach out to your attorney for some advice on what you should do.
Six Incorporation Concepts You Owe It to Your Future Company to Understand and Get Right
- Corporate Form – What corporate form is best for your company? Will it be a C-corp, S-Corp, LLC, etc? Read Business Structures: LLC vs. C Corporation
- Authorized Shares – How many authorized shares will your company have? Do you know the difference between issued, authorized, and outstanding shares? Read Authorized Shares: Where Do They All Go?
- Par Value – What is the par value? How do you you decide on the lowest amount you can sell a share of stock for? What should your par value be? Read Par Value: More Than Zero
- Registered Agent – Registered Agent – You’re going to pick a registered agent. A lot of people pick one without understanding who or what they are choosing. (They’ll start to pay attention when they get a renewal bill a year later.) Your company can’t exist without one! Read Understanding Your Registered Agent
- Incorporator (and the Resignation of the Incorporator) – You will choose an incorporator. This will be a short-lived position since they’ll hand power over to the board and resign shortly after becoming incorporator. You may want your incorporator to sign the sole incorporator consent document, which contains the resignation. Read Call Me The Incorporator
- Bylaws – The bylaws set out the rules for how your company will conduct its corporate functions. For example, how things work for quorum at stockholder or board meetings, indemnification for directors and officers, and establishing the company’s fiscal year. Make sure you have bylaws; you will most likely need them down the road in a diligence and won’t want to stop everything to commission a lawyer to create them.
Incorporating your company is an action-packed phase of the company, and there’s inevitably a lot going on, but in my experience taking the time to understand these six concepts will be worth it in the long run.
Did you know that you can incorporate directly through Fidelity? Learn more.
Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.
