ࡱ> OQN7 :bjbjUU -V7|7|6 l8$8,p4 /111111$ "Uh"Uxjxxx.8>x/x x6K4d kD2$0>#>#xJb6Invicta Law Group pllc 1000 Second Avenue, Suite 3310 Seattle, WA 98104-1046 Tel: 206.903.6364 Fax: 206.621.6443 MEMORANDUM _____________ TO: Mr. George Thornton Mr. Don Harkleroad Ms. Nicole Nelson Mr. Charles Buchalter Ms. Linda Knapp Redmond Cycling Club FROM: Christopher S. Beer DATE:  TIME \@ "MMMM d, yyyy" July 25, 2001  ADVANCE \l 66 RE: Incorporation Responsibilities and Information Now that the formation of Redmond Cycling Club (the Corporation) has been completed, we would like to clarify and reemphasize the responsibilities of the Corporation by listing some of the most important requirements of federal, state, and local law. A discussion regarding operating in corporate form to protect the limited personal liability of members, officers and directors is also included. A corporation is a separate legal entity, which is created by state law and subject to specific statutes. A corporation is fundamentally different than a partnership or sole proprietorship, which are legally indistinguishable from their owners. A corporation is a separate entity for virtually all federal, state and local tax purposes. Nonprofit corporations formed within the state of Washington are subject to the Corporations and Associations Nonprofit Act (the Act). The Act provides that a corporation is formed by filing articles of incorporation with the Secretary of States office. The new corporation is then governed by the Act, its articles, and its bylaws, which provide basic structure and form. Within the limitations of the Act, the articles and bylaws may both be amended at any time to alter the way the corporation is governed. Formal corporate actions of the shareholders and directors may be taken at formal meetings or by unanimous written consent. Shareholders are responsible for election of the board of directors, and have the right to control certain major actions of the Corporation. Directors are responsible for the appointment of officers and governance of the Corporation, including setting policies and authorizing certain important or extraordinary transactions. Day-to-day control of the Corporation is exercised by its officers.  seq level0 \*arabic 1. Name. The name of the Corporation is stated in the Articles of Incorporation to be Redmond Cycling Club. This name should appear on all corporate checks and bank accounts, business letterhead, business cards, invoices, notices, official publications, and all promissory notes and contracts to which the Corporation is a party. If the Corporation desires to change its name, it is necessary to file Articles of Amendment to the Articles of Incorporation with the Secretary of State. 2. Registered Agent and Office. The Corporation has elected George Thornton to act as its registered agent. The registered agent receives official notices and service of process for Redmond Cycling Club. The address of the registered office is 1000 Second Avenue, Suite 3310 Seattle, WA 98104-1046. The Secretary of State was notified of the Corporations registered agent and office in the Articles of Incorporation. The Secretary of State must be notified if you ever decided to change registered agent or office. 3. Corporate License Renewal\Annual Report. Each year, the registered agent of the Corporation will receive from the Washington Secretary of State a notice to renew the Corporations license. The first of these reports, the Initial Report is due within 120 days of the filing of the Articles of Incorporation AND within 30 days of the date of organization meeting. The notice for the subsequent license renewals generally arrives four to six weeks before the renewal deadline, which is set by the month of incorporation. Please complete and sign the license renewal form and then forward the form as it instructs along with the annual filing fee which is currently $60 per year. Please respond promptly when you receive the renewal form. The Secretary of State assesses a delinquency fee of $25 if the renewal forms are not filed in a timely manner. Automatic dissolution of the Corporation is the penalty for failing to file the renewal forms within 60 days of the deadline specified. 4. Special Registrations, Licenses, and Permits. In preparing the legal documentation to form the Corporation, unless specifically requested by you to do so, we will not undertake to prepare any other documents or make any determinations regarding the necessity of the Corporation to file forms and applications with city, county, state and federal agencies regarding any special registrations or permits. It is important that all special registrations are made without delay, in order to avoid penalties which may be levied for late filings. 5. Liability Issues. One of the most attractive characteristics of a nonprofit corporation is that the shareholders risk only the amount of their investment and are not individually responsible for corporate obligations. This limited liability advantage flows from the recognition by the law that a corporation is a separate legal person, and its debts and liabilities are personal to it. Persons who serve as directors are also protected by limitation of liability. The Corporations Articles of Incorporation provide that a Director of the Corporation shall not be personally liable to the Corporation or its Shareholders for monetary damages for conduct as a Director, except for acts or omissions involving intentional misconduct or a knowing violation of the law or for any transaction from which the Director personally received a benefit to which he or she is not legally entitled. Further, the Corporations Articles provide indemnification for Directors and Officers, subject to similar exceptions for limitation of liability as described above. In order to maintain these limitations on personal liability for shareholders, directors and officers, we suggest that you observe the following: a. The formalities of corporate procedure, including the holding of Shareholders and Directors meetings and the keeping of minute books, should be observed. b. The Corporation should be operated as a totally separate business and financial unit, with separate books and accounts, and without any intermingling or confusing of its funds, affairs, and transactions with those of the Shareholders (whether individuals or Corporations), officers, Directors, or affiliated Corporations in disregard of the corporate entity. Commingling, or confusion, of personal and corporate funds is the single most common cause of courts disregarding a corporate entity and imposing personal liability. The temptation to use the corporate checkbook to pay a personal expense, or vice versa, must be avoided. If you must access corporate funds for personal use, or vice versa, it must be evidenced as a business transaction such as a loan (evidenced by a promissory note), purchase or sale of stock, or the like. Please keep in mind that if the Corporation has more than one shareholder, you should obtain the prior written consent of all Shareholders and Directors to any business transaction or loan involving a Shareholder, officer, or Director. If you ever have any doubts in this regard, please call. c. No representation or other holding out should be made which would lead people to believe that the business is being conducted as a sole proprietorship or as a partnership. Rather, you must always hold your business out as a corporation, and hold yourself out as an officer and agent of the Corporation. This includes using separate stationery, business cards, signs, advertising, invoices, and other business materials which clearly identify the business by the full corporate name. Whenever your name should appear in conjunction with the Corporation, your title or office should also be identified. This is particularly important when signing any document on behalf of the Corporation. You should sign all documents with your name and title, for example: REDMOND CYLCING CLUB By______________________________________ George Thornton Its President Such a signature clearly identifies your action as being in your corporate capacity and subjects only the Corporation to liability. By contrast, if you were to sign a document without indicating your office, the law presumes you to sign as a comaker and you will be individually liable along with the Corporation. Here again, if you ever have a question in this regard, please call. d. The Corporation should have adequate capital to meet its obligations and such contingencies as are reasonably to be expected in business. 2. Annual Meeting of Shareholders and Directors. Washington State law requires that all corporations hold annual meetings of Shareholders and Directors. This may be done in three ways: (a)a formal meeting with our office arranging a time, place, and suggested agenda and producing minutes of the meeting for signature; (b)meeting by consent whereby we supply you with minutes of the meeting which meet minimal legal requirements; or (c)you hold your own meeting and prepare your own minutes. In the latter case, we would like to have a signed original of the minutes for insertion in the corporate minute book and the corporate file we maintain for you. Annual meetings for Shareholders and Directors can be combined each year into a single meeting or meeting by consent. Shareholders elect Directors for the succeeding year and the Directors then appoint Officers. It is important to hold annual meetings. If a corporation fails in its housekeeping, it runs the risk of having the corporate entity ignored and exposing its Shareholders to personal liability for corporate action. This usually serves as a good time to review the operations of the business for the previous fiscal year. As your corporate counsel, we will assist you in keeping current the minute book for the Corporation by reminding you each year of when the annual meeting of the Shareholders and Directors should take place and by preparing, upon your instructions, the necessary documents and minutes for those meetings. Special Shareholders or Directors meetings may be necessary if the Corporation wishes to make any basic changes in its structure, such as a merger or amendment to the Articles of Incorporation. In addition, certain special actions require the holding of a meeting of the Board of Directors, including the issuance of additional shares of stock, the execution of important agreements, adoption of employee benefit plans, business loans and leases, bonuses and salaries paid to key employees, and any other substantial business transactions which the Corporation undertakes. These actions can be approved by written consent of all the Directors and/or Shareholders, in lieu of actually holding a Directors and/or Shareholders meeting. We will rely upon you to inform us of any of these important business transactions that should be documented so that we can prepare any necessary papers. If you have any questions or are ever in doubt as to what constitutes business to be approved by the Directors and/or Shareholders, please contact us. 3. Maintenance of Corporate Minute Book. The Corporations basic corporate records, as distinguished from its business records, are maintained in its corporate minute book. A minute book generally contains the Articles of Incorporation and Amendments to the Articles; Bylaws; Minutes of Meetings of Shareholders and Directors and Consents of Shareholders and Directors in lieu of meetings; important agreements; state Corporate License Renewal/Annual Report forms; state qualification certificates; and the Shareholder register. A well-kept minute book is an essential part of the companys records. It can be used to establish corporate motives and intent. This is significant since minutes are always inspected during an IRS audit. Minutes may also be damaging if corporate actions are not properly worded. We will maintain a duplicate copy of the corporate minute book here in our office, and provide you with the original corporate minute book for safekeeping, unless we hear otherwise from you. 4. Public Records. Clients with newly formed corporations sometimes wonder how much of the information they have just provided for us is available to the public. Documents filed with the Corporations Division of the Secretary of States Office are kept in Olympia and are accessible by the public. These documents include the Corporations Articles of Incorporation, Articles of Amendment, Articles of Merger or Consolidation, Articles of Dissolution and the Corporate License Renewal/Annual Report form. From these documents anyone can ascertain the registered agent and office of the Corporation, the names and addresses of its Directors and Officers, the date of incorporation, and whether the Corporation is for profit or has non-profit status. Some information is not readily accessible to the public, including the number and identity of Shareholders, the amount of stock issued and outstanding, and financial information about the Corporation. However, some of this information can become available if it is included on deeds, leases, mortgages or UCC statements that are recorded with the county or state. State or federal securities laws may require the Corporation to reveal extensive financial information. Please feel free to call if there is anything we can do to assist you or if you have any questions. I look forward to working with you in the years to come and hope that you will always feel comfortable to call whenever questions arise. If I am not available, please direct your inquiries to Sara J. Zimmerman, who works closely with me to assist our corporate clients.  -  PAGE 5 - REDC 2 ag250309 pqs~3_dz     q r ǾǾǾǾǧǛǾǛ>*@@mHnHu j@U@B*CJaJph@aJ@B*CJph@ j5U mHnHu jUCJ55\ :@CJ@CJ5@(CJ\5@(CJ\=6M_qrs~3]_yz ^ ^`$a$ $ !a$ !$a$$xa$::: ln1$ a$%klmno 013fghij ############$ $3$4$S$b$c$d$e$f$%%%%%w&>*@@B*CJaJph@aJ@B*CJph@Xgi #### $4$c$e$%%x&z&)))) $ a$ $ a$$ `]^``a$$ 0]^`0a$$ a$w&x&y&z&}&&))))))))))0+1+2+3+4+f,g,h,i,j,..L/M/N/O/P/0000002222233333z4{4}4~444n7o7p7q7r7H9I9J9K9L9::::::::::::0JmHnHu0J j0JUjCJUmHnHu>*@@@B*CJaJph@aJ@B*CJphL)1+3+g,i,M/O/002233{4~4o7q7I9K9::::::::$a$$a$$ a$:::CJOJQJmHnHu:::+ 0P P &P/ =!"#$% i4@4 NormalCJ_HmH sH tH DD Heading 1$$$ & F@&a$5VV Heading 2-$$ & F h0@&^`05VV Heading 3-$$ & F h0@&^`05VV Heading 4-$$ & F hp0@&^p`05VV Heading 5-$$ & F h@ 0@&^@ `05VV Heading 6-$$ & F h0@&^`05VV Heading 7-$$ & F 0@&^`05VV Heading 8-$$ & F h0@&^`05V V Heading 9- $$ & F 0@&^`05<A@< Default Paragraph Font*B@* Body Text,@, Header  !, @, Footer  !&)@!& Page Number(O2( No Spacing.@B. 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