Fitzgibbons Law Offices
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Casa Grande, AZ 85122
Formation of an Arizona Corporation
Choosing which type of legal entity to form is one of the most important decisions to make when starting a business. This article examines the
corporation, which is a popular choice for an Arizona business entity, especially when a desire or need exists to issue corporate stock.
A corporation is a separate legal entity
formed through a registration process giving it distinct legal rights and
liabilities. Corporations can be established as either profit-seeking companies
or non-profit companies and are generally owned by shareholders and controlled
by a board of directors. Arizona’s corporation statutes provide basic rules to
govern the rights and obligations of a corporation and its directors and
To form a corporation, Articles of
Incorporation are filed with the Arizona Corporation Commission. Once approved,
the Articles are published in a newspaper approved by the Commission. The
Articles of Incorporation set forth the name and address of the corporation, its
general purpose, the duration of the corporation (if it will not be perpetual),
the incorporators, the number of directors, the names of the initial board of
directors, the statutory agent, the amount of stock authorized to be issued, and
whether the company will be classified as a subchapter S or subchapter C
pursuant to the Internal Revenue Code. For a non-profit corporation, the
Articles of Incorporation should also set forth necessary restrictions on the
activities of the company and the transfer of assets upon its dissolution.
Officers and Directors
In addition to the Articles of
Incorporation, each officer, director, trustee or incorporator who holds more
than a 10% interest in the corporation must file a Certificate of Disclosure.
The Certificate of Disclosure sets forth whether such individuals have been
convicted of certain felonies; subject to an injunction, judgment, decree or
permanent order for certain actions; or involved in certain bankruptcy
There are no minimum limits on the
number of incorporators, shareholders, members or directors for a corporation.
Therefore, one person may start a corporation and serve as the sole
incorporator, shareholder, director and statutory agent, or there may be several
incorporators, shareholders and directors involved. However, a corporation needs
to be aware of several rules and regulations that may apply once certain stock
thresholds are met. Such laws include, but are not limited to, the Securities
Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002.
Directors and officers need to be aware
of their statutory duties to the corporation. Although generally exempt from
liability, directors and officers may be liable for corporate action or inaction
that is not done in good faith. The “business judgment rule” presumes that
directors and officers act in good faith, but this presumption may be overcome
by clear and convincing evidence showing that good faith was not exercised. If
such presumption is overcome, the director or officer may be held personally
liable for their actions.
Once a corporation is established, the
directors should but are not required to approve bylaws that govern the
functions of the corporation, including meeting procedures, roles and
responsibilities of the directors and officers, rules and restrictions related
to the issuance and transfer of corporate stock, dissolution, and dispute
Corporations are statutorily required to
hold annual meetings and file annual reports with the Arizona Corporation
Commission. Depending on the bylaws, it may also be necessary for a corporation
to hold special meetings of the shareholders and/or directors to conduct company
business. Any actions not specifically authorized by Arizona statute or the
bylaws should be approved by the shareholders and/or directors.
It is important for individuals wanting
to form a corporation to decide at the outset how the affairs of the business
and the individuals involved will be addressed. Having such foresight will
assist the corporation when dealing with any unanticipated matters or disputes.
Business Entity Formation in
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