Formation of a Corporation in New York State
What are the rules governing the formation of a corporation in New York State? In this article, a New York corporate law attorney will explain what you’ll need to do to register a business or limited liability company in the state of New York.
Who can form a corporation?
The New York Business Corporation Law (“BCL”) prescribes certain formalities which must be adhered to when forming a corporation in the State of New York. At least one person aged 18 or older is necessitated for this purpose. The incorporators must sign a certificate of incorporation so that it may be delivered to the New York Department of State, which is responsible for filing it. It is at this point that a corporation comes into existence. Subsequently, the incorporators are expected to hold an organizational meeting for the purpose of adopting the corporation’s bylaws and electing its first directors.
What may constitute the corporation’s name?
The words “corporation,” “incorporated” or “limited” – or an abbreviation of these – must be included in the corporation’s name. It is insufficient to include the word “company” in the corporation title. The name cannot be identical to that of another domestic or foreign corporation, or be similar enough that the possibility of confusion arises. It also may not include a word or phrase which is proscribed by statute or which implies that it wields power or has a purpose which it lacks. For example, an incorporated lawyer’s office may use the term “lawyer,” but this cannot be employed by a corporation not engaging in this profession. Using a name with intent to deceive may constitute a misdemeanor and will be enjoined.
Application to reserve a name for up to 60 days may be made to the New York Department of State. Two separate 60 day extensions may be applied for if good cause is demonstrated in an affidavit.
How do these rules apply to foreign corporations?
As a rule, corporations which do business in New York State must adhere to the same rules as domestic ones. Interestingly, a foreign corporation which does not meet the BCL’s standards for acceptability of its corporate name may submit an application for a fictitious name under which it will conduct business in the state.
Corporate purpose
The BCL allows a corporation to be formed for “any lawful purpose,” excluding one which is reserved to corporations that must be formed under another NY state statute, such as that pertaining to railroads, banking, transportation and insurance. Unlike, for example, an Israeli company, a corporation may not employ this catch all phrase in its incorporation – the certificate of incorporation may not include a clause stating that its purpose of formation is “to engage in any lawful act or activity for which corporations may be organized”. Yet, the BCL makes no requirement that the certificate of incorporation enumerate the corporation’s powers.
Corporate office
The county in New York of the “office of corporation” must be stated. The “office of corporation” references the office mentioned in the certificate of incorporation and need not be a place of business.
Authorized shares
The certificate of incorporation must set forth the following:
1) Authorized shares – The aggregate number of shares authorized to be issued with a statement stating either their par value or its absence;
2) Share classes – If shares are to be divided into classes, the number of each class, a statement either of the par value or its absence and statements of designations, relative rights, preferences and limitations of shares of each class;
3) Preferred shares – If preferred shares are to be issued in series, there must be a statement of variations in the series, a statement of the board’s authority, if any, to establish and designate series and fix variations between them, and a statement of any limitations to the board’s authority to change the number of shares of any series of preferred shares;
4) Preemptive rights – For corporations existing as of February 22, 1998, provisions limiting or denying preemptive rights must be set forth.
Who is the designate for service of process?
The New York Secretary of State must be designated for purposes of service of process. It should be noted that the secretary is the agent for service of process involving domestic and foreign corporations even in the absence of an express designation being made.
What is the status of a registered agent?
The corporation’s registered agent for service of process, if any, must be designated in the certificate of incorporation. It is not mandatory to designate such an agent and this will be supplemental to the role played by the secretary of state. For someone to serve as a registered agent, they must be a resident of New York, have a business address in the state, or have in it a registered domestic or foreign corporation.
For how long can a corporation exist?
The duration of a corporation is perpetual, unless otherwise limited by the certificate of incorporation and for the time period it designates.
Limitations on director’s liability
The certificate of incorporation may limit the liability the directors have towards the corporation’s shareholders for a breach of duty. The breach, however, may not: be the result of bad faith; a consequence of intentional misconduct or a knowing violation of the law on the part of the director; accrue to the director a financial profit or other advantage to which he lacks legal entitlement; or be in violation of the director’s statutory responsibilities.
Additional provisions
To the extent that additional provisions are not in violation of statute, the certificate of incorporation may insert them in respect of rights and powers to which shareholders, directors and officers are entitled.
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