B.
Corporate Statutes
Each state has many laws that regulate the organization and operation of a business corporation. The portion that governs most areas of corporate operation is the state's
Business Corporation Act (BCA). Your state sheet, contained in Appendix A, provides the
specific BCA provisions for major areas of corporate organization and operation. This section simply provides a summary of how the state BCA and other business laws will affect your corporate life and tells you how to locate the laws if you need to look something up.
Business Corporation Act
Most of the laws that govern corporations are contained in your state's business corporation
statutes, usually titled the "Business Corporation Act" (BCA) or "Business Corporation Law." The BCA spells out the essential rules for forming and operating a
corporation. For example, the BCA explains the requirements for preparing and filing articles of incorporation to form the corporation, the rules for preparing and changing corporate bylaws, and the basic rights and responsibilities of corporate directors, officers, and shareholders. The BCA explains when and how directors and shareholders meet to approve corporate decisions, and how much leeway a corporation has in setting its own rules that vary from the BCA requirements. We cover BCA director, officer, and shareholder rules in more detail in the remaining sections of this chapter.
| The Model Business Corporation Act |
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The basic corporate statutes of many states contain the same, or quite similar, rules for
organizing and operating business corporations. The reason for this uniformity is that a number
of states have adopted some, most, or all of the provisions of a standard law: the Model Business Corporation Act. The Act undergoes periodic changes, which states are free to enact.
In the "Corporation Law Online" section of your state sheet in Appendix A, we list the name of your state's Business Corporation Act and tell you where you can browse it online. If you do not have an Internet connection, you will need to find a BCA book or pamphlet to
browse the law. Your state filing office may offer a free pamphlet that contains the state's BCA; call the office to see if one is available. (Some states charge a small fee for this material.) If your state filing office does not provide a printed version of the BCA, ask if they have the telephone number of a commercial publisher who does. Expect to pay about $30 for a printed commercial version. If you're willing to do a bit more legwork, your local law library is the best place to go to research the state BCA free of charge. Just ask a reference librarian to point you toward the right series of books. The business section of a local public library is another likely place to find your BCA.
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Other Laws
In addition to the Business Corporation Act, other state laws regulate special areas of
corporate activity. These include the following.
Securities act or blue sky law. This law contains each state's rules and procedures for offering, issuing, selling, and transferring shares of corporate stock and other securities within the state. The term "blue sky law" is derived from the sometimes underhanded, and often colorful, practices of corporate con artists who, in return for an investment in their latest get-rich-quick undertaking, would promise the "blue sky" to unsuspecting investors. The securities laws of each state attempt, through registration and disclosure requirements, to tone down the picture painted by stock promoters to a more realistic hue.
The "State Securities Information" section of your state sheet provides basic information on the securities laws and procedures that apply to issuing your initial shares to the founders of your corporation. This information includes the Web address of your state's securities law office, where you can usually find a link to your state's securities law. If the state securities office website does not provide this link, we give you the Web address where you can find your state's securities law online. If you do not have an Internet connection, call your state securities office; often it provides a free pamphlet that contains your state's securities act. (The telephone number for your state securities office is also listed in your
state sheet.)
For more information on securities laws and procedures, see "Stock Issuance and the
Securities Laws," below.
State Tax or Revenue Code. Most states impose corporate income or franchise taxes that are based on the amount of taxable income earned in the state by a corporation. Your corporation pays these taxes in addition to federal IRS income taxes. Each state's Tax or Revenue Code typically contains the state's income or franchise tax rules.
Tax statutes are even more off-putting than legal statutes. We think you'll get the most
useful information directly from your state's tax publications, forms, and other instructions
posted on your state's tax agency website. The "State Tax Information" section of your state sheet provides the website and other contact information for this office, along with
information about the type and rate of any corporate income or franchise tax imposed by your state. If you don't have an Internet connection, call the state tax office telephone number listed in the "State Tax Information" section of your state sheet and ask for corporate publications and forms by mail.
Other state and local laws. Other state laws affect the operations of all businesses, whether or not they are incorporated. For example, state and local building codes, professional and occupation licensing, environmental laws, local ordinances, zoning laws, and other laws and
regulations may apply to your business and its operations.
Laws that apply when forming a business. For an excellent resource on the various state laws and regulations that apply to forming all types of businesses, corporate and noncorporate, see The Small Business Start-Up Kit, by Peri H. Pakroo (Nolo), available in both national and California editions.
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