How does a corporation actually work?
FormationGovernanceDirectorsOfficers
A corporation is a legal person separate from the people who own it. Its stockholders own it and elect its directors. Its board of directors is legally responsible for managing it and makes the major decisions. Its officers, the president or CEO, the secretary, the treasurer, are appointed by the board and run the business day to day. In a one-founder startup the same person holds all three roles, and the law is fine with that, as long as the roles are exercised in the right order and written down: the stockholder elects the director, the director appoints the officer, the officer signs the contracts.
The documents
The certificate of incorporation, called articles in some states and the charter in conversation, is the one filed with the state. It names the company, its registered agent, the shares it may issue and their rights, and the protections for directors. The bylaws are adopted by the board and never filed: they say how directors are elected, how meetings are called, who the officers are, and usually restrict transfers of stock. The organizational consents come next, signed the day the charter is stamped: the incorporator appoints the first directors, and the directors adopt the bylaws, appoint officers, authorize the founder stock, open the bank account and approve the standard forms the company will use with employees.
Tax
A corporation that has not elected S status is a C corporation. It files its own return and pays federal tax on its profit, and its stockholders pay tax again on dividends. For a company that reinvests rather than distributes, the second layer rarely arrives, and the stock, if it qualifies as QSBS, can be sold with the gain partly or wholly untaxed.
Keeping the shield
Limited liability means the company's creditors cannot reach the stockholders' personal assets. Courts set that aside, and pierce the corporate veil, when the owners have treated the company as an extension of themselves: personal and company money in one account, no board approvals for anything, contracts signed in the founder's own name, a company started with nothing in it. The habits that protect the shield are cheap. A separate bank account. A written consent for every significant decision. Contracts signed as the company, by name and title. Transactions between the company and a founder disclosed to the board and approved by the directors who are not interested in them.
Arabella's Delaware formation packet includes the charter, bylaws, incorporator action, initial board consent, founder stock purchase agreements and invention assignments, signed in the app once the state approves the filing.
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Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.