Business Formation Documents: A Complete Guide for Small Business Owners

Introduction

Key Things to Know

1. 1

   Your choice of business structure (sole proprietorship, partnership, LLC, corporation) determines which formation documents you need and affects taxation, liability, and operational requirements.

2. 2

   MWBEs should prepare additional documentation for certification programs that can provide access to special contracting opportunities and resources.

3. 3

   Formation documents should anticipate future growth and include provisions for adding investors, changing ownership, or expanding operations.

4. 4

   State requirements vary significantly, so research your specific state's filing procedures, fees, and ongoing compliance obligations.

5. 5

   Working with a business attorney to draft or review your formation documents is an investment that can prevent costly legal issues in the future.

6. 6

   Proper formation documents not only establish your business legally but also create the foundation for business relationships, financing opportunities, and eventual business sale or succession.

7. 7

   Keep your formation documents updated as your business grows and changes to ensure they continue to serve your needs and comply with current laws.

Delaware Requirements for Business Formation Documents

• Certificate of Incorporation (Delaware General Corporation Law (DGCL) § 102)

  The primary document filed with the Delaware Secretary of State to legally form a corporation, including the corporation's name, purpose, authorized shares, registered agent, and incorporator information.

• Certificate of Formation (Delaware Limited Liability Company Act § 18-201)

  The document filed with the Delaware Secretary of State to legally form a limited liability company (LLC), including the LLC's name and registered agent information.

• Corporate Bylaws (Delaware General Corporation Law (DGCL) § 109)

  Internal rules governing the corporation's operations, including procedures for meetings, elections of directors, appointment of officers, and other corporate governance matters.

• LLC Operating Agreement (Delaware Limited Liability Company Act § 18-101(7))

  Agreement among LLC members governing the company's operations, management structure, capital contributions, profit distributions, and member rights and responsibilities.

• Stock Certificate Requirements (Delaware General Corporation Law (DGCL) § 158)

  Requirements for issuing stock certificates to shareholders, including necessary information that must appear on certificates.

• Federal Tax ID (EIN) Requirements (Internal Revenue Code § 6109)

  Requirements for obtaining an Employer Identification Number from the IRS, necessary for tax filing, opening business bank accounts, and hiring employees.

• Securities Compliance (Securities Act of 1933, Securities Exchange Act of 1934)

  Compliance with federal securities laws when issuing stock or other securities, including potential registration requirements or exemptions.

• Delaware Franchise Tax Requirements (Delaware General Corporation Law (DGCL) § 501-518)

  Annual franchise tax obligations for Delaware entities, including calculation methods and filing deadlines.

• Foreign Qualification Requirements (Delaware General Corporation Law (DGCL) § 371-385)

  Requirements for registering to do business in states other than Delaware if the company operates in multiple states.

• Corporate Records Requirements (Delaware General Corporation Law (DGCL) § 219-220)

  Requirements for maintaining corporate records, including minutes of meetings, stock ledgers, and other corporate documents.

• Indemnification Provisions (Delaware General Corporation Law (DGCL) § 145)

  Provisions protecting directors, officers, and other corporate agents from personal liability for actions taken on behalf of the corporation.

• Business Purpose Limitations (Delaware General Corporation Law (DGCL) § 102(a)(3))

  Requirements regarding the stated purpose of the business in formation documents, with Delaware allowing broad or specific purpose clauses.

• Registered Agent Requirements (Delaware General Corporation Law (DGCL) § 132)

  Requirements for maintaining a registered agent and registered office in Delaware for service of process.

• Federal Employment Laws Compliance (Fair Labor Standards Act, Occupational Safety and Health Act, Title VII of Civil Rights Act)

  Compliance with federal employment laws if the business will have employees, including tax withholding, workplace safety, and anti-discrimination provisions.

• Intellectual Property Protection (U.S. Copyright Act, Patent Act, Lanham Act)

  Provisions for protecting company intellectual property, including assignment of IP rights from founders and employees to the company.

• Corporate Opportunity Doctrine (Delaware case law, including Broz v. Cellular Information Systems, Inc.)

  Provisions addressing the fiduciary duty of directors and officers not to take business opportunities that should belong to the corporation.

• Minority Shareholder Protections (Delaware General Corporation Law (DGCL) § 342-356 (Close Corporations))

  Provisions protecting minority shareholders from oppression by majority shareholders, particularly important for closely-held corporations.

• Business Combination Restrictions (Delaware General Corporation Law (DGCL) § 203)

  Provisions regarding business combinations and anti-takeover measures that may be included in corporate charters.

• Annual Reporting Requirements (Delaware General Corporation Law (DGCL) § 502)

  Requirements for filing annual reports with the Delaware Secretary of State to maintain good standing.

• Benefit Corporation Provisions (Delaware General Corporation Law (DGCL) § 361-368)

  Special provisions for benefit corporations that pursue public benefit alongside profit, including requirements for public benefit reporting.