When you start a business, selecting the structure best suited to your enterprise is crucial. Opting to form a C corporation, even if you choose to make an S election, you must submit Articles of Incorporation to the North Carolina Secretary of State. Of course, without consulting a knowledgeable business attorney to plan your organizational structure, you may struggle to answer the questions correctly. However, should a C corporation be the optimal entity structure for your business, your North Carolina Articles of Incorporation will establish your corporation in our state.
Start at the Beginning
The first step to creating your C corporation as an entity is to fill out form B-01. You’ll need to have a business plan previously written and know the name of your company. You’ll decide which designation goes after your company’s registered name. You may choose from these possibilities:
Number and Type of Shares
You will need to know the number of shares that your corporation will have the authority to issue. The minimum number of shares to authorize is one. Before answering this question, speak with your attorney for advice on the number of shares to allow.
Will your company offer:
- All of one class, designated as common stock
- Divide shares into classes or series within a class as provided in an attached schedule, with the information required by N.C.G.S. Section 55-6-01.
If you divide the shares, you must designate:
- One or more classes of shares that together have unlimited voting rights
- One or more classes of shares are entitled to receive the net assets of the corporation upon dissolution.
All class shares must have preferences, limitations, and relative rights identical to those of other shares of the same class unless the articles of incorporation divide the class into a series.
However, if you further divide the classes into series, there are additional requirements for filing an attachment with descriptions of your different classes of shares in your Articles of Incorporation.
Classes of Shares
The structure of your company as you start off is crucial to the success of your venture. For example, if you divide your stock into classes or series, you can give special rights or special attention to certain classes or series. You can provide groups of individuals voting rights while others have no voting rights. You can even give some series the right to limited voting.
Using classes and series helps you organize your structure in exact ways. You decide who possesses shares at what level and when they can redeem their shares. You even determine what they get when redeeming shares or set conditions that prevent or require the selling or conversion of shares.
You can give preference to some series and no preference to others. Deciding how to calculate distributions and whether dividends may be cumulative, noncumulative, or partially cumulative gives you the power to organize in a way that benefits the company and incentivizes investors.
You can authorize one or more classes or series within a class of shares to have:
- Special, conditional, or limited voting rights, or no right to vote
- Redeemable or convertible by the corporation, the shareholder, or another person, or at a designated event;
- cash, indebtedness, securities, or other property
- in a designated amount or an amount determined with a prescribed formula or reference to data or events
- Distributions calculated in any manner, including dividends that may be cumulative, noncumulative, or partially cumulative
- Preference over any other class or series within a class of shares with respect to distributions, including dividends and distributions upon the dissolution of the corporation.
The Registered Agent
Next, you will enter the name of the company’s registered agent and address. This designation must go to one of the following:
- Individual who resides in North Carolina
- Domestic business corporation
- Nonprofit corporation
- Limited liability company whose business office is identical with the registered office
- A foreign corporation, nonprofit corporation or limited liability company authorized to transact business in North Carolina whose business office is identical with the registered office.
If your company has a principal office, you’ll give that information and address also. You only need one incorporator to file as a corporation and you’ll include their information here also.
You may also include any other provisions as an attachment to your Articles of Incorporation. Whatever you attach is part of your official filing as a corporation.
This is a good place to include your purpose as a corporation and your limits of liability. You can see statutes in Chapter 55 of the North Carolina General Statutes to get a better idea of what you may include. However, seeking the advice of an experienced business formation attorney can make all the difference to your business structure and purpose working well for your unique vision and goals.
Finish the Filing
Identify your company officials and your business email address to help prevent fraud. Your Articles of Incorporation are effective on the date and at the time of filing, unless you specify a delayed date or an effective time. You’ll need to get the names and signatures of the entity executing your Articles of Incorporation and also the incorporators. Paying a fee of $125 to file your Articles of Incorporation is part of the process also.
Business Formation attorneys often handle the details of filing your articles of incorporation. An experienced attorney fully understands the implications of using classes, series, limits of liability, purpose statement, and more. Consulting with a knowledgeable attorney can help form a stable bedrock for your business to stand and grow on.
We Can Help
At Hill Law, we specialize in business law. We understand the questions you need answered when starting a corporation. Whether this is your first business or you are a seasoned entrepreneur, we work with you to deliver the level of service you need to get your business off to a successful start. Contact us today and find out how we can be a part of your team and help grow your business.