Question

Corporations exist everywhere. They have perpetual existence, are a creature of a state, and have the ability to raise capital very quickly. They also are several different kids of corporations from S- Corporations to Limited Liability Corporations, to Municipal Corporations. Even though is it a label on a class of business forms, they still have variety in what they can accomplish.

Tara and Dave want to start a business to make furniture. Tara is very creative and Dave is the financial manager on the team. They do not have very much capital to start the business and they want to start a corporation in order to have the ability to raise capital very quickly on a stock exchange. Once the profits start coming in, they can create more designs to manufacture, increasing the corporation's value and its shares on a stock market.

Before the corporation can begin making profits, there are several steps that it must complete. Starting with a promoter,

1. What does the promoter have to do to begin the ground work in making the corporation? Does it have to make contracts such as leasing a space, finding subscribers, and creating a corporate mission? Please explain fully.

2. Once the corporation has been organized,  what must the leadership of the corporation do with the secretary of state to make the company an official corporation?

3. Now that the corporation has its official compliance with state law, its creates a board of directors. The board is comprised of individuals that have expertise in creating furniture and they see that the company is not only making furniture, but also that it is designing books. What will the most likely response of the Board be to Tara and Dave as leaders in the company?

Answer 1

1. Initial work incidental to the creation of a company like promotion, incorporation, and floatation, and soliciting people to make investment is done by the promotor as well as has the duty to disclose all the material facts regarding the company or the business thereof. He does all the groundwork necessary before the incorporation of the company. A comprehensive examination of the viability, profitability as well as future prospects of the development is also taken up by the promotor while taking the aid and assistance of lawyers, accountants, cost accountants, a company secretary, and engineers. He may also arrive into contracts with third parties, finds directors and shareholders, obtains business assets for company use, and on behalf of the company negotiates business contracts.