Becoming a Corporation: How to Transition from “Me” to “the Company”

[Note: This post was written while I was a practicing attorney running a solo law practice. Since April 2015, I have been working with attorney, executive and entrepreneur clients as a career coach and writer, and I am not currently available for legal engagements.]

A client of mine recently received her filing receipt evidencing incorporation in the State of New York. Her astute next question was “now what?” She had been carrying on business in her own name and wanted to know how to begin conducting her activities as a corporation.

She was asking, in other words, “how do I transition from me to the Company?”

This is a great question. I am sure that, by knowing to ask it, this client is off to a great start. One of the most important features of a corporation is that is generally offers limited liability, so corporate protocol must be followed to make sure the corporate structure is respected. This is often called “i’s” dotted and “t’s” crossed. In practice it means, among other things, that:

– company and individual activities are kept separate (especially in cases where money is involved),

– the company’s board of directors (“Board”) and officers do what is expected of them (and each individual role is respected), and

– the company follows the direction of the Board and Chief Executive Officer or, as this title may be designated at a nonprofit entity, Executive Director.


Here are some of the important, initial steps you will need to take. There may be others in your home state and for your particular entity and activities, but these are generally universal:

1) If you were the sole incorporator and have not yet elected a Board or have until now filled all roles, you will need to elect your Board. It is generally preferable to have at least five Board members, although you can start with a smaller Board and expand if you only have a small core group of dedicated directors at the beginning. Choosing your Board is one of the most important decisions of a young organization. You should give careful consideration to who will best advance the organizations’s goals and take their roles and duties seriously.

Electing the Board – or expanding the Board – is done at an organizational Board meeting and recorded in the minutes of the meeting. Alternatively, Board members can be elected by unanimous written consent of the Board.

2) The Board, in its organizational meeting or via written consent, will also elect officers of the corporation. Core officer roles are generally President, Secretary and Treasurer. A Vice President is also commonly elected to serve as an alternate to the President. In some states, these roles can all be filled by one individual, although generally that is not recommended to avoid potential conflicts of interest and provide for good corporate governance.

3) If you have already undertaken activities in your individual name or as an incorporator – such as incorporate or make some initial payments to third parties – it may be that the Board needs to review and ratify your prior actions. For example, the Board would ratify and approve the incorporator(s)’ act of forming the corporation.

If your prior activity has been substantial, it is possible that that only certain activities should be ratified, and this may depend on the nature of the activity and ongoing relationships. At the same time, if there are contracts in your individual name that should now belong to the company, these may need to be assigned to the corporation or terminated. It can get complicated if there has been substantial activity or in certain circumstances, so if you have any doubt, speak with a business attorney about how to sort this out.

4) The Board should also authorize other important actions to be undertaken by officers of the corporation, such as applying for an Employer Identification Number (EIN) and opening a bank account. (Note that the IRS now allows a company to apply for its EIN online. Click here.)

5) The newly-formed corporation should also draft and adopt bylaws, which the Secretary of the corporation will insert into the minute book along with the Certificate of Incorporation, all board resolutions and other important corporate documents. I suggest to my clients that they keep an electronic copy of all documents as well as paper copies, even if the laws of their home state allow for only electronic versions. In the digital database, care should be taken to name files in an identifiable manner and to keep the documents secure. The contents of the bylaws should reflect what the corporation will actually do – not simply be copied from a form – and it is a best practice to have a copy at Board meetings to which the directors can refer if needed.

6) State and local tax law matters and registrations need to be addressed.

7) The corporation should put basic policies in place, such as a conflict of interest, whistleblower and document-destruction policies. Over time as the company grows, these policies may be worked into an employee handbook.

8) The corporation should hire an accountant or bookkeeper – or designate someone with expertise from within its ranks – to keep track of revenues and expenses as well as tax and other deadlines.

The above steps provide an overview of certain important first steps for a new corporation. Depending on the nature of the organization, there may be other important steps to consider, but as a minimum these steps should be followed. As discussed above, these are not simply “formalities” but rather will allow for effective governance of a corporation and go a long way toward preserving limited liability for its directors and officers.

None of the information posted on this site constitutes legal advice or forms an attorney-client relationship, and there may be facts not discussed here that are relevant to your situation.

Lessons from Hurricane Sandy: Business Continuity

As a business lawyer, I track not only the legal aspects of business but also how people live, breathe and think about their businesses. After Hurricane Sandy, business continuity is one issue that is, or should be, on the minds of all business owners.

[Note: This post was written while I was a practicing attorney running a diverse solo law practice, and it is one of a small number of “legacy posts” that I have retained on the site. When published, this was one of my most popular posts. Since April 2015, I have been working as an executive coach and writer, and I am not currently available for legal engagements.]

I spoke with a restaurant owner in my hometown of Stamford, Connecticut in the days before the hurricane and asked him what where his plans for the coming storm. His answer: “Pray that it misses me, because I will lose thousands of dollars of frozen food.” He didn’t even begin to mention the potential loss of revenue if his doors were shuttered for a week or more, either unable to imagine it or unwilling to foresee the risk.

Unfortunately, all too often business continuity planning – preparing to keep a business operating and mitigate losses during a hurricane or other disaster – is seen (if considered at all) simply as an expense rather than an opportunity. If you own a business, here are some thoughts about how to ramp up your business continuity efforts.

1. Evaluate the Risks. The first question is always what risks are greatest to your individual industry and business. In the restaurant example, maintaining current inventory and access to alternate suppliers (if a main supplier is unavailable) are two major and obvious factors, but there is much more to consider. Let’s start with the workforce. How will the restaurant’s manager communicate with employees in the case of a disaster or other emergency? Have any been cross-trained in the event that staff is limited and has there been a dry run of the management pyramid as the staff fulfills their new roles? How will mundane tasks be met, such as washing dishes and taking out the trash? Is alternate staff available? Then there’s technology. How much of the business relies on technology and what will happen if the power fails? Have you secured an alternate means of processing credit cards, for example, or planned a manual backup? There’s also the site to consider. If the site of the restaurant becomes unavailable or suffers a security risk for any reason, does the business need to close or can meals be delivered to customers in another manner (e.g., takeout)? What other risks may face your business?

2. Invest in a Backup Power Source. While we can all debate whether major storms and other disasters are becoming more common, after Hurricane Irene, Hurricane Sandy and other worldwide events, it is clear that businesses need access to power when the lights go out. Decide how much backup power generation is sufficient in different scenarios that could face your business and investigate how you can secure access to the resources needed to run it, such as natural gas or gasoline. If you cannot afford a generator, can you share one with another local business? If you choose to go that route, make sure to sign a contract outlining the rights and responsibilities of each business, including how much power the generator owner and second business can pull at any given time and how this will be monitored.

3. Review Insurance. Does the business have sufficient insurance in the specific areas that cause risk? Flood insurance is a prime example. If your business could experience flooding and is not insured against that risk, it is time to review and update your policy.

4. Review Contracts. If your business contracts require delivery of goods or services at a specific date and time, include “force majeure” clauses in your form contract and any other significant agreements. These clauses vary in their language, depending on the subject matter of the contract, but generally state that if a force outside of your control (i.e., a “higher force” or “force majeure”) causes a delay in or impossibility of performance, you are excused from the contract for the duration of the event.

5. Plan How to Communicate with Employees. Mentioned in the risk-analysis above, businesses need a tested means of communicating with employees in the event of a disaster. Which employees have access to landlines, cell phones and email, and does everyone use them on a regular basis? Is there a backup emergency phone number for each individual? Who maintains the employee list, and what is the plan if that person is incapacitated? Can you outsource this function and does it make sense to do so?

6. Have Built-In Redundancy. If you are reliant on data, plan to backup that data and your central server as needed. Keep copies of important records offsite or online. If you are heavily reliant on other service providers to run your business, such as an Internet provider, find out if their own backup plans are sufficient to allow customers to continue to do business with you if the service provider’s systems fail.

7. Test. A business continuity plan has little value on paper. Make sure it actually works. Have Plans A, B and C in place about how your business can be run, and test each one quarterly or annually.

8. Disseminate. Similarly, a plan has no value if the key players do not know about it. Make sure your significant employees are clued into the business continuity plan, know their roles and can implement it if needed.

None of the information posted on this site constitutes legal advice or forms an attorney-client relationship. This is a public forum. Please do not post confidential or fact-specific information regarding your legal questions on this site.

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