The Forming & Dissolving of Corporations

by Jeff Franco J.D./M.A./M.B.A.

All 50 states allow individuals and preexisting business entities to create corporations, but each jurisdiction has the authority to draft its own corporate formation and dissolution laws. Although there may be differences in the formal requirements to create and dissolve a corporation in each state, some general similarities exist across jurisdictions.

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Choosing a Name

The first step to creating a corporation is coming up with a name that is not already in use by another corporation in your state. Many jurisdictions, such as Delaware, allow you to search through an online database to determine whether the name you want to use for your corporation is available. If you find that the corporate name is available, but you aren’t ready to form the corporation yet, you can often reserve the name ahead of time by paying a fee.

Filing Formation Documents

Once you decide on the name for your corporation, many jurisdictions require you to file a standard corporate formation document. States refer to this document by a number of different names, such as "articles of incorporation" or "certificate of incorporation." The information you must provide generally includes the corporation’s name, the number of shares the corporation will authorize, the name and address of the corporation’s registered agent and in some cases, the name and address of the individual filing the document as well. Legal formation of your corporation is generally effective at the time you file the formation documents with the appropriate state agency--often the secretary of state’s office--and paying the filing fee.

Dissolving the Corporation

In most states, you will find that your corporation has an indefinite duration unless you provide a date of automatic dissolution in your corporate formation documents. However, in the event you decide to dissolve the corporation, you can usually file a certificate or articles of dissolution with the same state agency with which you filed the formation documents. In Delaware—a popular jurisdiction for creating corporations—your certificate of dissolution must include the corporation’s name; the effective date of formation and dissolution; and, if there is more than one shareholder, a statement that indicates approval by the corporation’s board of directors and a majority of the shareholders.

Foreign Corporation Issues

Corporate laws throughout the country commonly refer to corporations created in a different state as a foreign corporation. If your corporation will engage in business activities outside of the state where legal formation occurs, you should evaluate whether it’s necessary to register the corporation in other states. In New York, for example, foreign corporations can be denied access to state courts to resolve business disputes if an application for authority isn’t filed. However, if you ever dissolve the corporation in your home state, New York also allows for the filing of a certificate of termination of existence.