Business & Corporations - FAQs
What is a Corporation?
Answer: A Corporation is a separate legal entity formed by its owners. A Corporation is created when papers are filed with the proper state authority.
What are the Benefits of Forming a Corporation?
- Personal Asset Protection: A Corporation will allow you to separate and protect your personal assets. If the Corporation is properly structured and managed, you should have limited liability for business debts and obligations.
- Additional Credibility: Adding "Inc." or "Corp.” after your business name can add instant credibility. Consumers, vendors, and partners may prefer to do business with an incorporated company.
- Attractive Investment: The built-in stock structure of a corporation makes it attractive to investors and easier to transfer portions of ownership.
- Name Protection: Other businesses may not file your exact corporate name in the same state.
- Perpetual Existence: Corporations continue to exist, even if ownership or management changes. Sole Proprietorships and Partnerships just end if an owner dies or leaves the business.
How is a Corporation Organized?
- Shareholders- The Shareholders own the Corporation, but they do not directly manage the Corporation.
- Board of Directors- The Board of Directors (who are elected by the Shareholders) manages the Corporation and makes the major business decisions.
- Officers- The Officers (who are appointed by the Directors) make the day-to-day decisions of the Corporation and are responsible for everyday management.
Who should form a Corporation?
Answer: A Business Law Attorney
- A Business Law Attorney- Will typically assume the responsibility of complying with New York State Law requirements when forming the Corporation and complete the corporate book
- Not an Accountants, non-Business Law Attorneys or online services- The typically have the papers filed in New York State, but provide an incomplete corporate book. You are then responsible to comply with New York State Law requirements by preparing and completing the Bylaws, Organizational Minutes and Stock Certificates, etc.
Can One Person be the Sole Owner of the Stock in a Corporation?
Answer: Yes. One person can be the sole Shareholder, Director and Officer. Further, one person can be the sole Shareholder, but appoint others as the Directors and/or Officers.
What if More than One Person Owns Stock in a Corporation?
Answer: If there is more than one Stockholder in a Corporation, a Shareholders' Agreement should be prepared to set forth the duties and obligations of each Shareholder to the other. Customarily, such agreements set forth what happens if one Shareholder dies, wants to sell, retires or is no longer able to participate in the business. They also prevent ownership from being transferred to persons who are not approved by the other Shareholders.
How Should the Corporation Identify Itself?
- Stationary, Signs, etc.: All stationary, bills, business cards, online materials and signs should reflect the exact name of the Corporation including the word "Corp.", "Inc." or "Ltd." as reflected in your Certificate of Incorporation.
- Telephone Listing:Make certain that your telephone listing is reflective of your corporate status (i.e. that your name includes "Inc." or "Corp.")
- Signing Documents: When documents are signed by the Corporation, the name of your Corporation and the capacity of the signer should be reflected, i.e. “XYZ Corp. , By Ms. Smith, Title (President, Treasurer, etc.)"
Should the Corporation Keep Personal and Corporate Matters Separate?
Answer: Yes. After the business has been incorporated, the Corporation must remain financially and legally separate from any of its Shareholders in order to preserve the benefits and protections of Corporate legal status. You should keep specific records and accounts, file necessary government documents, and hold regular Shareholder meetings or get written consents or waivers from Directors and Shareholders.
Once the Corporation is Formed, Who Else Should be Contacted?
- The Accountant: The Accountant will need to be notified immediately. The Accountant will need to get an employer identification number from the IRS and discuss whether or not to make S Corporation tax elections.
- Insurance Company: Every Corporation which has an employee in NY State (and once a Corporation has an Officer, it is deemed to have employees) is required to have Workers' Compensation and Disability Insurance coverages. Certain exemptions apply to principal Shareholders.
- Post Office: In order to receive mail in the name of the Corporation, please be certain to notify the Post Office of the new name of your Corporation and its proper address for delivery of mail.
What Should be Done if the Address of the Corporation Changes?
Answer: If somebody sues your Corporation, service on the Corporation will be made at the address reflected in the Certificate. If that address changes, a Certificate of Change must be filed with the Secretary of State. Your failure to notify NY State of a change of address may result in the issuance of service of process on the Corporation without your actually receiving the documents, to the detriment of your Corporation.
What Types of Corporate Services Does Cory A. Levine, Esq. Perform?
Answer: Cory A. Levine, Esq provides the following Corporate services:
- Corporation and LLC Formations
- Purchases & Sales of Businesses
- Preparation of Shareholders & Buy/Sell Agreements
- Preparation of Employment Agreements
- Preparation of Lease Agreements
- Procurement of Liquor Licenses
- Preparation of Notes and Mortgages
- Business Financing Closings