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Forming a De Facto Corporation

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Formation of a Corporation

Generally, a corporation is formed through compliance with a state incorporation statute. In most states, the typical route to forming a corporation is by correctly filing the articles of incorporation with the appropriate government agency. A corporation that was formed through compliance with the law is called a de jure corporation.

De Facto Corporations

However, if you did not comply with your state’s articles of incorporation statute, you still might have created a de facto corporation. Generally, de facto corporations are created when the following three elements are met:

  • There must have been a statute under which you could have incorporated. State incorporation statutes set out the requirements for accomplishing incorporation.
  • You must have made a good faith attempt to comply with the statute. Examples of "good faith" efforts to comply include when the articles of incorporation were lost in the mail, when the articles of incorporation were addressed to the wrong person, and when the articles of incorporation were filed too late.
  • There must be evidence that the business is being run as a corporation. The corporation’s officers, directors, or agents must have conducted business in the corporate name or exercised corporate privileges.

The Benefits of Being Treated as a Corporation

One major benefit of forming a corporation is that directors, officers, and shareholders are shielded from personal liability for the corporation’s obligations. When a de facto corporation is created, corporate shareholders, officers, and directors are usually protected from personal liability just as they would be for a de jure corporation.

Should I Consult an Attorney?

If you are interested in forming a corporation, have questions about your state’s incorporation statute, or have failed to comply with your state’s incorporation statute, you should consult an experienced business lawyer. Your lawyer will help you understand your state’s complicated corporation laws and the benefits of incorporating.

Photo of page author Peter Clarke

, LegalMatch Content Manager

Last Modified: 10-22-2013 01:14 PM PDT

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