How to Get Up and Running
or What to Do After Filing Your Articles
Warning! Contrary to some people's thinking, just filing Articles of Incorporation or Articles of Organization and receiving your Certificate of Authority as a corporation or limited liability company, does not make your business an operating entity
The exact steps, required to "activate" your entity, depend on the circumstances of your business. However, the following steps will usually be needed to bring your entity to "life" after receiving your charter. The exact process varies quite a lot from a corporation to a limited liability company:
Step 1. The organizational meeting, capitalize the business
The incorporator or organizer needs to call an organizational meeting of the director(s) or member(s) named in the Articles. At this organizational meeting many of the start-up elections and choices will be dealt with. Among the most basic are:
- Adopt a set of By-laws or Operating Agreements. By-laws are the guidelines for operating the corporation, and must be compatible with the Articles of Incorporation. The Operating Agreement is the operating guidelines for the limited liability company and usually appoint a manager for the company among other things.
- Ratification of, or replacement of, the director(s) named in the Articles.
- Adoption of; an official set of company records, a corporate seal, and the form of corporate stock.
- Indemnification and release of the incorporator(s) or organizer(s).
- Issue shares of stock for a "capital" investment. Stock must be "sold" and issued to activate the corporation. In the case of the limited liability company the initial capital contribution(s) and the initial ownership percentages are designated.
- Appointment of corporate officers. Under the latest Colorado rules it is possible for a corporation to have only one officer. Usually there is a minimum of two separate officers (president and secretary). The limited liability company members will appoint one or more managers.
- Authorization by the Board of Directors for the corporation to begin the business for which it was formed, or the limited liability company to begin the business for which it was formed.
- Authorization by the Board/or member(s) for completion of any necessary bank forms and resolutions by the officers/manager(s) to open the company checking account(s), savings account(s), or to apply for credit.
- Election of a tax year end, choosing when the corporation will close its books of accounting for purposes of filing income tax returns. In the case of a limited liability company, it will usually be limited to a calendar year fiscal year.
- The members of the limited liability company may elect to be treated as a corporation for income tax purposes. This is usually the decision of the member(s). The limited liability company may also make the corporate sub-chapter S election. (Check with your tax advisor before making either of these elections as there will be tax consequences.
Step 2. Required identification numbers
The corporate officers or the LLC manager will need to apply for a Federal Employer Identification number and any other identifying numbers or licenses required by your business area. This process is especially needed if he business will have employees.
Step 3. Open a business checking account
Open a company checking account. Most banks will require a minimum deposit, a copy of your Articles of Incorporation or your Articles of Organization and your Federal Employer Identification number.
Step 4. Transfer of assets and titles
If licensed vehicles are transferred to the company you will need to re-title those vehicles in the name of the company. You should have a Bill of Sale transferring any non-licensed assets to the company.
Warning! Change in ownership may require a change in insurance.
Step 5. Create the business image
Design and printing of business cards, stationery, billing invoices, and other business paperwork so that they show the name of the company as the name of the business. If the business will be operating under names other than the name as shown on the Articles, you need to register this dba (doing business as) names with the appropriate government agency.
Step 6. Notify the world
You MUST notify all suppliers of goods or services and all customers that they are now doing business with a limited liability company or corporation. In some cases this will mean re-writing contracts and/or agreements to change the names of the "persons" in those contracts and/or agreements.
Step 7. Tax elections
If you have chosen to become a Subchapter S corporation, you must file the appropriate documents with the Internal Revenue Service within 45 days of the activation of the corporation.
Step 8. Other choices and options
Other areas which should be addressed at this time are; choice of method of accounting, choice of tax advisor, adoption of legal and/or tax related policies such as medical reimbursement program, doctrine of corporate opportunities, etc.
WARNING! Caution should be used when making decisions with regard to your company. Some areas of concern are: makeup of your Board of Directors or Board of Advisors, appointment of corporate officers, appointment of a the manager of your limited liability company, choosing any special income tax status for the company, election of fiscal year, accounting methods, etc. Many of these elections can cause severe restrictions on operations. Some tax elections may;
- restrict the deductibility of some expenses,
- increase the costs of keeping accounting records,
- unexpectedly cause some types of income to become taxable,
- and many of these elections are impossible to reverse.
It is highly recommended that you take your business plan, oral or written, to your tax advisor before making some tax elections. Your tax advisor should be able to explain in terms you can understand just why you should choose each option. If they cannot do so, consider another advisor.