Pre-Incorporation Agreements

Pre-Incorporation Agreements provide a means to specify the terms of the agreement between the persons forming a corporation before you incorporate to make everything clear. Sample previews are available for each state.

Why You Need a Pre-Incorporation Agreement

Introduction

A pre-incorporation agreement is essential to establish the management, control, and operation of the business during the pre-incorporation process. A pre-incorporation agreement can avoid future disputes by having an agreement on important terms at the beginning of incorporation, before later efforts complicate matters. Often, shareholders agreements and confidentiality agreements are created at the same time. US Legal Forms offers form packages that include a pre-incorporation agreement, shareholder agreements, and confidentiality agreements at a substantial discount, as well as incorporation forms and agreement forms that are available separately.

What is a Pre-Incorporation Agreement?

A pre-incorporation agreement is one of the legal forms used at the outset of the incorporation process. By using a pre-incorporation agreement, you are ensuring that everyone involved in forming the business has a clear understanding of the plans, thereby minimizing the chance for future disputes and litigation. A date for completing the formation of a corporation and provisions for handling the costs and expenses of incorporation are dealt with in the pre-incorporation forms. The forms lay out the basic organization of the business, its business name, business purpose, agreed upon directors and officers and their salaries, capital contributions, etc. The following are some of the basic terms included in pre-incorporation agreements:

  • The corporate name that will be registered for the corporation.
  • A statement of business purpose for forming a corporation.
  • A date for completion of corporate formation.
  • The address of the corporate headquarters that will be used in the articles of incorporation.
  • Any chosen officers or directors.
  • Capital contributions by initial shareholders.
  • Terms for establishment of a corporate bank account and authority for signing corporate checks.
  • Authority for carrying out business operations such as signing contracts and borrowing on behalf of the corporation.
  • Reimbursement of shareholder fees and expenses for handling incorporation and corporate matters.
  • Ratification of transactions over certain dollar amounts.

Other Important Business Forms Included in the Package

Included with the pre-incorporation agreement are a shareholders agreement and confidentiality agreement. The following is an explanation of the importance of the shareholders' agreement and confidentiality agreement:

  • Shareholder Agreements - This form is used to establish what happens upon the transfer of a shareholder's shares upon sale, death, bankruptcy, etc. There are provisions in the shareholders agreement for the corporation to have an option to purchase shares at an agreed upon value. A shareholders' agreement is used to prevent corporate control from being transferred to undesired shareholders and ensure smooth transition of ownership if a member of the business leaves or dies.
  • Confidentiality Agreement - The confidentiality agreement protects corporate interests by preventing disclosure of customer lists, trade secrets, processes, design, sales, product and marketing information, and whatever else your company agrees to protect from disclosure. Confidentiality agreements forms are used to ensure confidentiality of valuable corporate information and prevent it from being used to advantage your competition or damage the goodwill or profitability of the corporation.

Conclusion

Pre-incorporation agreement packages, with shareholders agreements and confidentiality agreement templates included, are the best way to ensure that future disputes and litigation are avoided during the incorporation process and beyond. The form packages offered by US Legal Forms are professionally drafted by attorneys and our business form templates can be modified in Word to suit your needs if desired.

Top Questions about Pre-Incorporation Agreements

  • Are promoters liable for pre-incorporation contracts?

    Yes, promoters can be held liable for pre-incorporation contracts until the company is officially formed and adopts those contracts. The liability aspect emphasizes the importance of clearly indicating the promoter's status in any Pre-Incorporation Agreements. Understanding these obligations can help you navigate potential legal pitfalls as you set up your business.

  • How do I fill out a corporate stock certificate?

    Filling out a corporate stock certificate requires information about the corporation, such as its name and the number of shares issued. You must also specify the shareholder's name and address while including a unique certificate number. Using a user-friendly platform like US Legal Forms can simplify the process and help ensure your Pre-Incorporation Agreements are correctly documented.

  • What information is required in a certificate of incorporation?

    A certificate of incorporation must include essential information such as the business name, address, purpose, number of shares, and the names of the incorporators. Additionally, you should specify any stock details and any limitations on business activities. Accessing templates from US Legal Forms can streamline the process and ensure your Pre-Incorporation Agreements meet legal standards.

  • How do I fill out a certificate of incorporation?

    To fill out a certificate of incorporation, begin by gathering necessary information about your company, including its name, address, and the number of shares authorized. Next, clearly outline the purpose of the business and identify the initial directors. Finally, you can utilize resources like US Legal Forms to ensure the accuracy of your Pre-Incorporation Agreements.

  • Is a promoter liable on pre-incorporation contracts?

    Yes, a promoter is typically liable for pre-incorporation contracts until the corporation accepts the agreement or agrees to assume the liability. This means that without proper planning and Pre-Incorporation Agreements, a promoter could face personal financial risks. Utilizing resources like uslegalforms can help in drafting agreements that outline liabilities clearly, ensuring better protection for promoters during this critical phase.

  • What is the effect of pre-incorporation?

    The effect of pre-incorporation is significant as it lays the foundation for the company's operations and legal standing. Pre-Incorporation Agreements can establish key terms related to ownership, management, and responsibilities, thus facilitating smoother transitions once the corporation is officially formed. They also provide clarity on each party's roles and expectations, which can prevent disputes down the line.

  • Is a promoter not personally liable for a pre-incorporation contract?

    Generally, a promoter can be held personally liable for agreements made before a corporation has officially formed. Pre-Incorporation Agreements can include provisions that clarify this liability, but without explicit disclaimers, the promoter's personal assets may be at risk. Therefore, it is crucial to consult legal experts or use platforms like uslegalforms to create detailed agreements that protect all parties involved.

  • What are the advantages and disadvantages of incorporation?

    Incorporation offers several benefits, including limited liability protection for owners, which shields personal assets from business debts. It also enhances credibility with customers and partners, potentially improving access to funding. However, incorporation can involve complex regulatory requirements and higher costs compared to operating as a sole proprietor or partnership. It's essential to weigh these pros and cons when considering Pre-Incorporation Agreements.

  • What are the consequences of pre incorporation?

    The consequences of pre-incorporation can include personal liability for promoters regarding contracts made before the corporation is formed. If not handled properly, these agreements may also create uncertainty among potential investors and employees. However, a well-structured pre-incorporation agreement can mitigate these risks and provide clarity for all parties involved. Utilizing platforms like uslegalforms can help you draft compliant and comprehensive pre-incorporation agreements, ensuring a smoother introduction to your business.

  • What is meant by pre-incorporation?

    Pre-incorporation refers to the period before a corporation officially comes into existence. During this phase, promoters may engage in various activities, including drafting essential documents like pre-incorporation agreements. It serves as a planning stage where the foundation of the business model is established. Grasping the significance of this period can enhance your approach to forming a corporation.