After the decision to incorporate has been made, many other important decisions must be made. The principals must decide where to incorporate and must choose and reserve a corporate name. Before the articles of incorporation can be filed, a purpose clause must be chosen, and an initial agent for service of process must be appointed. To prevent shareholders from becoming liable for corporate debts, the principals must be certain that corporate formalities are followed. The role of incorporators and promoters must be considered, as well as the method of compensating them, including reincorporation agreements and other forms of compensation. The principals should also plan for or consider the other commitments that may have to be made before incorporation, whether embodied in preincorporation agreements to incorporate, preincorporation subscription agreements, or preincorporation contracts with third parties.
The incorporators must further decide on such matters as financing and capital structure, the classes and number of shares to be issued, and to whom shares will be issued. In this regard, subscription agreements must be considered, as well as compliance with California and federal securities requirements. The incorporators must also decide what other methods of capitalization will be used, such as commercial loans and non-cash assets. To arrange for the structure and organization of the corporation, including the rights and duties of directors, officers, and shareholders, the articles of incorporation and bylaws must be drafted, executed, and filed. Many vital functions will be carried out at the first, or organizational, meeting or the board of directors.