Why Being Named an Incorporator Doesn’t Give You Ownership Rights

When incorporating, there are many issues to be resolved, and many questions to be answered.  Sometimes, those involved in forming a corporation struggle with decisions and answering the right questions.  For example, many times, an incorporator does not know that he does not have ownership rights simply through the virtue of their title. Therefore, it is important for incorporators to understand what their rights are, and how ownership rights are not automatic.

Incorporators can be either an individuals or entities.  They are responsible for the incorporation process.  Their signature is necessary to properly file the articles of incorporation.  In most states, including Florida, the life of a corporation does not begin until after the articles of incorporation have been filed.  Therefore, the incorporators’ job is immensely important at the outset of the corporation.  However, their involvement technically ceases after the corporation has been established with the state.

Typically, incorporators are the actual owners of the business.  In such a situation, although they begin as incorporators with very little rights, they become the owners of the corporation once its existence begins.  Therefore, they retain rights once the corporation has begun, but only because they have taken on a different role.  However, incorporators may sometimes be individuals hired simply for the incorporation process, known as dummy incorporators.  These can be individuals that specialize in the incorporation process and seek to ensure it is done properly.  Often times, these dummy incorporators are retained from a law firm.  Once the incorporation is complete, their power over the corporation ceases, and they do not receive ownership rights.

In sum, being an incorporator does not necessarily entitle you to ownership rights within the corporation.  This is many times an oversight by those involved in ensuring the smooth incorporation of the company.  However, the process of incorporation is extremely important, and the task of incorporating should not be left to just any individual who wishes to be given a title.  If you do not have experience incorporating, you may want to hire outside individuals just for the process of incorporation who then lose their ownership rights once the existence of the corporation begins.  The Trembly Law Firm has years of experience assisting clients incorporating their companies.  Call the Trembly Law Firm at (305) 431-5678 today to schedule your consultation.