Whenever you start a business, you might feel like you have to learn a new language. Some of those terms can include “articles of incorporation”, “bylaws”, “organizational meeting”, and “incorporator”. Today we will delve into the word “incorporator”.
Limited Role of an Incorporator. First, a person’s status as incorporator of extremely limited significance due to the nature of an incorporator’s responsibility. The incorporator’s only responsibility is to have his/her name listed on the articles of incorporation and providing the articles of incorporation with the Indiana Secretary of State for filing. Indiana Code § 23-1-21-1 states:
“One (1) or more persons may act as the incorporator or incorporators of a corporation by causing the person’s name to be listed on the articles of incorporation and having the articles of incorporation provided to the secretary of state for filing.”
Sole Statutory Obligation of Incorporator. The comment to Indiana Code § 23-1-21-1 clarifies the very limited responsibility of an incorporator by stating, “This section sets forth the sole statutory obligation of incorporators.” Essentially, once the incorporator has successfully incorporated the business, his/her obligations are completely satisfied. The statutes require nothing more of an incorporator.
Successful Incorporation. How, then, is a business successfully incorporated? A business is successfully incorporated once the Indiana Secretary of State has filed the articles of incorporation. Once that is completed, the incorporator’s your sole statutory obligation is satisfied.
Organizational Meeting. After incorporation, a corporation is required to hold an organizational meeting in which it “completes the organization” by (1) electing officers, (2) adopting bylaws and (3) carrying on any business. If the articles of incorporation name a board of directors, then the board of directors will “complete the organization”. If the articles of incorporation do not name a board of directors, then the incorporators are responsible for calling the organizational meeting. In this event, the incorporators will simply name the board of directors at the organizational meeting and then the board of directors will take over the task of “competing the organization”. Indiana Code § 23-1-21-5.
Limited but Foreseeable Legal Issues. The only foreseeable legal issues of an incorporator arise out of obligations, if any, incurred during the pre-incorporation stage of the business. Indiana Code § 23-1-21-4 states:
“All persons purporting to act as or on behalf of a corporation, knowing there was no incorporation under this article, are jointly and severally liable for all liabilities created while so acting.”
Again, this is a very limited risk of liability. Basically, if the incorporator bound the corporation to any obligation prior to its actual existence, the incorporator may be held liable for the obligation.
Removal as Incorporator. May an incorporator remove his/her name from being listed as incorporator of the business? Unfortunately, it is not possible to remove your name as incorporator. As described above, the incorporator’s role is merely to be the person submitting the articles of incorporation to the Indiana Secretary of State. Once that happens, the incorporator’s responsibilities end. Although the incorporator’s responsibilities are then complete, the State of Indiana still keeps record of the individuals who started the business. A reason for such a public record may be to keep track of any pre-incorporation obligations incurred by the incorporators on behalf of the prospective corporation.
While some people may wish to remove their name as incorporator, his/her status as incorporator will continue. In fact, the State Form 50655, which is used to change governing persons, e.g. officers, directors, principals, members, etc., states in the directions, “Incorporators cannot be changed.”
In sum, the incorporator’s role is limited to starting the business by providing the Indiana Secretary of State with the articles of incorporation. The incorporator’s only foreseeable liability as incorporator would originate from pre-incorporation obligations. In addition, those pre-incorporation obligations must have been on behalf of the prospective corporation. Finally, and unfortunately, the name of any incorporator may not be changed.