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.

Vermont Requirements for Business Formation Documents

• Business Entity Selection (11 V.S.A. § 1.01 et seq.)

  Specifies the type of business entity being formed (corporation, LLC, partnership, etc.) and complies with entity-specific formation requirements.

• Articles of Organization/Incorporation (11 V.S.A. § 4001 (LLCs); 11A V.S.A. § 2.01 (Corporations))

  The primary formation document filed with the Vermont Secretary of State that establishes the legal existence of the business entity.

• Registered Agent Designation (11 V.S.A. § 4005(a)(2) (LLCs); 11A V.S.A. § 5.01 (Corporations))

  Designation of a registered agent with a physical address in Vermont who can receive legal documents on behalf of the business.

• Operating Agreement/Bylaws (11 V.S.A. § 4003(b) (LLCs); 11A V.S.A. § 2.06 (Corporations))

  Internal governing document that outlines ownership, management structure, voting rights, and operational procedures of the business.

• Business Name Compliance (11 V.S.A. § 4005(a)(1) (LLCs); 11A V.S.A. § 4.01 (Corporations))

  Ensures the business name complies with Vermont naming requirements and is distinguishable from other registered entities.

• Federal Tax ID (EIN) Requirements (26 U.S.C. § 6109)

  Compliance with federal requirements to obtain an Employer Identification Number for tax purposes.

• Business Purpose Statement (11 V.S.A. § 4005(a)(3) (LLCs); 11A V.S.A. § 3.01 (Corporations))

  Clear statement of the business's purpose and primary activities, which must be lawful under Vermont law.

• Capital Structure (11 V.S.A. § 4054 (LLCs); 11A V.S.A. § 6.01 (Corporations))

  Details the initial capitalization, ownership percentages, and classes of stock or membership interests.

• Management Structure (11 V.S.A. § 4054(b) (LLCs); 11A V.S.A. § 8.01 (Corporations))

  Defines whether the business is member-managed or manager-managed (for LLCs) or specifies the board of directors structure (for corporations).

• Securities Compliance (9 V.S.A. § 5101 et seq.; 15 U.S.C. § 77a et seq. (Securities Act of 1933))

  Ensures compliance with federal and state securities laws when issuing ownership interests or stock.

• Trade Name Registration (11 V.S.A. § 1621)

  Registration of any trade names or 'doing business as' (DBA) names with the Vermont Secretary of State.

• Business Licenses and Permits (31 V.S.A. § 701 et seq.)

  Identification of required state and local business licenses and permits specific to the business activity.

• Tax Election Provisions (26 U.S.C. § 1361 (Federal); 32 V.S.A. § 5811 (Vermont))

  Provisions addressing the entity's tax treatment elections (e.g., S-Corporation status) under federal and state law.

• Benefit Corporation Provisions (11A V.S.A. § 21.01 et seq.)

  For benefit corporations, provisions specifying the public benefit purpose and reporting requirements.

• Low-Profit Limited Liability Company (L3C) Provisions (11 V.S.A. § 4162)

  For L3Cs, provisions establishing the primary charitable or educational purpose with only secondary profit concerns.

• Membership/Shareholder Rights (11 V.S.A. § 4055 (LLCs); 11A V.S.A. § 7.01 et seq. (Corporations))

  Detailed provisions on voting rights, profit distributions, and transfer restrictions for members or shareholders.

• Dissolution Procedures (11 V.S.A. § 4101 et seq. (LLCs); 11A V.S.A. § 14.01 et seq. (Corporations))

  Procedures for voluntary dissolution of the business entity and winding up of affairs.

• Annual Report Requirements (11 V.S.A. § 4072 (LLCs); 11A V.S.A. § 16.22 (Corporations))

  Provisions acknowledging the obligation to file annual reports with the Vermont Secretary of State.

• Foreign Entity Registration (11 V.S.A. § 4141 (Foreign LLCs); 11A V.S.A. § 15.01 (Foreign Corporations))

  For businesses formed outside Vermont but operating in the state, provisions for registering as a foreign entity.

• Anti-Discrimination Compliance (21 V.S.A. § 495 et seq.; 42 U.S.C. § 2000e et seq. (Title VII))

  Provisions ensuring compliance with federal and Vermont anti-discrimination laws in employment and business operations.