Practice tools for communicating with clients during the incorporation process

February 4, 2016

Attorney communicationBusiness counselors are often asked to work with client to incorporate a new business and the sheer volume of this type of work means that it makes sense for the lawyer to create and maintain a library of practice tools for communicating with clients during the incorporation process.  In this post we’re going to spotlight some of the tools that are available for use right now in Business Transactions Solution.

If the client decides to do business as a corporation, all information needed by the lawyer to incorporate the business should be obtained. The information provided should be specific enough to enable the attorney to complete and file the forms needed for the incorporation process, such as the articles of incorporation, bylaws and shareholders’ or employment agreements. At this point in the process, counsel and the clients should have already entered into an appropriate engagement letter. Details relating to the preliminary steps that should be taken to collect client information and establish the attorney-client relationship are provided in the chapter on  Collecting Information and Establishing Attorney-Client Relationship (§§ 1:1 et seq.) in Business Transactions Solution.

It is common practice for the lawyer to have the client fill out a prepared questionnaire or data packet regarding the particular information needed for incorporation in the chosen state at the initial client interview. See Master Form at Business Transactions Solution § 30:90. Whenever possible, the questionnaire should be customized to the requirements of the specific state selected for incorporation of the new corporation, such as Delaware. See Business Transactions Solution § 30:134. Any questionnaire should be accompanied by a client communication that describes the reasons for collecting the information and provides guidance on responding to specific queries in the questionnaire. See Business Transactions Solution § 30:136.

Gutterman WLEC bannerIf all of the needed information can be obtained well before the anticipated date of incorporation, it may then be possible to complete all of the necessary forms for incorporation without further consultation with the principals. However, it will be necessary to have all documents signed by the appropriate individuals as shareholders, directors, or officers as indicated on the forms. The attorney should transmit the initial draft of the certificate of incorporation to the client with a communication—letter or email—that explains the various provisions that the attorney has selected for inclusion in the certificate. See Business Transactions Solution § 30:137. The attorney should also send the client a letter that briefly explains the consequences of electing corporate status. See Business Transactions Solution § 30:140.

Following incorporation, the attorney should transmit the initial draft of the resolutions to be approved by the initial directors with a communication—letter or email—that explains each of the actions, why they should be taken at that time, and the specific issues that the directors should consider with respect to each of the actions. See Business Transactions Solution § 30:138.

S031378_240x180Once the corporation has been formed and organized, the attorney should collect all of the documents and records relating to the formation and organization and place them in the minute book, retaining a copy for the attorney’s own files, and deliver the minute book to the client. The delivery of the minute book should usually be accompanied by one or more post-incorporation communications to the client, including:

  • An incorporation reporting letter setting forth a report on the incorporation and the present legal status of the corporation (see Business Transactions Solution § 30:142);
  • A letter or memorandum which once again sets out for the client the responsibilities associated with operating as a corporation, including compliance with corporate formalities (see Business Transactions Solution § 30:141); and
  • A communication covering the fiduciary responsibilities of directors and officers (see Business Transactions Solution § 30:139).

In addition to counseling regarding corporate governance, the client should be provided with information regarding other post-incorporation matters (see Business Transactions Solution § 30:140), including tax matters, including federal and state income taxes, employer tax and withholding responsibilities, and property, sales, and other taxes; employment law and other personnel matters; licensing and permit requirements; insurance; and securities laws  The attorney should also calendar any important dates relating to the corporation, such as the date of the annual meeting, and make arrangements for period legal audits. See generally Legal Audits and Investigations §§ 224:1 et seq in Business Transactions Solution.  The attorney should sit down with the principals of the new corporation and go over all the other steps that are required in order to establish a new business. See Starting New Businesses (§§ 18:1 et seq.) in Business Transactions Solution.  Finally, the attorney should devise a system for readily accessing the records pertaining to the corporation and complete a corporation information sheet that includes basic information regarding incorporation and management of the corporation (see Business Transactions Solution § 30:132).

Titles by Alan Gutterman