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LET'S PRACTICE
Name: _____________________________________________________________________________ Innovation Team Members: __________________________________________________________________________________ __________________________________________________________________________________ Innovation Team Project Part 2 Forming a Corporation You are continuing to walk in the shoes of an innovator and entrepreneur. By now, your innovation team has completed the R&D process, including creating and submitting designs plans to the USPTO. Your team has received a patent and trademark. Now you will move forward with formalizing your business arrangement by forming a corporation . To do this, you will need to 1) complete the corporate bylaws ; 2) complete articles of incorporation ; and 3) hold a board meeting to debate and determine share distribution. What are Bylaws? Your startup team wants to clarify one another’s rights and responsibilities, as well as grow the business, while limiting personal liability. You’ve decided to form a corporation. The first thing you’ll do is create corporate bylaws . These are important because they: • set out the day-to-day rules for your organization. • outline the structure of your organization • establish the rights, and specify the duties of its shareholders, board of directors, and executives. What are Articles of Incorporation? Articles of Incorporation are like a corporate birth announcement filed with your state’s Secretary of State. They must be filled in order for the corporation to be a legally recognized entity. They include: PRODUCT PREVIEW
• name of the corporation • principal place of business • name and address of the corporation’s registered agent • statement of the corporation’s purpose
• the corporation’s duration • information about the corporation’s shares • the names and addresses of the incorporators • incorporators’ signatures
WARNING! A corporation has many operational formalities such as providing appropriate notice to shareholders of meetings, following proper election proceedings, ensuring a quorum at meetings, and filing Articles of Incorporation with the state. No matter how informal your team’s attitude and work habits are, corporate formalities must be followed to the letter ! If officers and directors neglect to follow corporate formalities, they risk losing protection from personal liability.
231 THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
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