- What steps need to be taken once a new entity is formed?
- What other corporate formalities need to be observed once an entity is formed?
Once a new water fund has been formed, there may be a few additional steps that need to be taken to allow the entity to be operational, they include:
Applying for an Employer Identification Number (EIN):An EIN is a number issued to entities including corporations, partnerships, and limited liability companies, among others, by the IRS for tax filing and reporting purposes. Generally, an entity will need to get an EIN in order to open a bank account. An entity can file a Form SS-4, with the IRS in order to get an EIN.
Filing to do business in a foreign jurisdictionIf a water fund operates in a jurisdiction other than the jurisdiction in which the entity has been formed, then it will typically be necessary for the entity to qualify to do business in that jurisdiction. Generally, qualifying to do business in a particular jurisdiction will require the entity to file a form with the jurisdiction and pay a fee. It is important to consult whatever body oversees corporate entities in a particular jurisdiction to see what the requirements are for a foreign entity to conduct business therein. Among the states in the United States, this is typically referred to as qualifying to do business as a foreign corporation (a corporation incorporated in one state is “foreign” in another state in the United States).
Opening bank accountsOnce a newly formed water fund has an EIN it can open a bank account.
Appointing officersOfficers of an entity, including a president, vice president, secretary, or treasurer as provided for in the governance documents of the entity, can be appointed either in the initial governance documents themselves or through resolution or written consent of the board or members when the entity is formed.
Secure rights, licenses and insuranceThe entity should make any necessary filings to obtain and protect any intellectual property rights, such as trademarks, of the entity, obtain any necessary licenses it requires for its activities and obtain insurance to cover any potential losses of assets and any potential liabilities arising from the execution of the water fund’s action plan. See discussion of intellectual property rights.
FOR NON-PROFIT ENTITIES
Tax exemptionNon-profit corporations will generally need to file federal and state tax-exemption applications and prepare annual information returns. In the United States, the federal application form is the Form 1023 of the Internal Revenue Service and the annual information return is Form 990.
Compliance with charitable solicitation lawsIf the non-profit corporation intends to solicit donations in the states of the United States, the non-profit must confirm and comply with the registration or other qualification requirements for solicitation of charitable donations in each state in which the entity intends to seek donations. Annual filing of financial statements or other information may be required to retain such registration or qualification.
Many new entities will approve taking the actions listed above either at an initial meeting of the entity’s members or board of directors or through unanimous written consents.
What other corporate formalities need to be observed once entity is formed?
Books and Records: For the duration of an entity, it is important for those operating the entity to maintain corporate records, which should include minutes of the meetings of the board or members as well as copies of board resolutions or executed written consents approving corporate actions. It is common that entities will be asked to produce corporate records from time to time so it is critical that these records be kept current and fully reflect the actions taken by entity. The failure to maintain proper records can affect the ongoing legal and tax status of the entity, and can also lead to shareholder, director or officer liability for obligations of the company to third parties.
Often corporations establish minute books, which include, in some kind of binder to which additional documents can be added over time, the articles of incorporation and bylaws (and any amendments thereto over time, resolutions (or written consents) of the board of directors and shareholders (or, in the case of a non-profit, members, if there are any), and minutes of the meetings of directors and shareholders (or members). Non-profits might also include federal and state tax exemption applications and tax-exempt status designation letters. Such minute books ensure that corporate records will be maintained in a sustainable and accessible manner.