What are the differences between incorporator and corporate promoter?

Table of Contents

3. Corporate Promoter vs Incorporator: Whats the difference?

4. The Legal Effects of Being a Promoter or Incorporator

Corporate Promoters and Incorporators are two terms often heard being used when referring to people involved in a corporation or company. The main difference between a corporate promoter and an incorporator lies in their role and function within the process of establishing a corporation.

A corporate promoter refers to an individual or entity that can take the initiative of coming up with and promoting the idea of forming a corporation. They identify the business opportunity, gather the necessary resources and undertake initial actions to create a corporation. Promoters can negotiate contracts, get financing, and set the early structure of the corporation before it is incorporated officially.

A corporation, on the other hand, has an incorporator who is that individual or entity who actually files with the proper government agency such as Secretary of State whatever documents and forms are required to create the corporation. They are also responsible for fulfillment of the legal requirements necessary to incorporate, including filing in the articles of incorporation and other documents required. Once the corporation is formed, the incorporator’s role normally ceases and the running and governing of the corporation gets passed on to board of directors or officers.

Aspect	Incorporator	Promoter
Definition	An incorporator is a person or entity involved in the legal process of forming a corporation by preparing and filing the articles of incorporation.	A promoter is an individual or entity that initiates the formation of a corporation by bringing together stakeholders, securing funds, and setting the processes that lead to the formation of the corporation.
Role in Corporation	Incorporators are directly involved in the legal establishment of the corporation. They are responsible for the documentation and formalities required to create the corporation’s legal identity.	Promoters play a more informal, initiating role. They are responsible for the early-stage activities that lead to the formation of the corporation, including gathering interest and resources.
Legal Responsibilities	Their main legal responsibility is the accurate and lawful preparation and filing of the articles of incorporation.	Promoters have a fiduciary duty towards the corporation and its future shareholders, requiring them to act in good faith, disclose relevant information, and avoid conflicts of interest.
Relation to Shareholders	Incorporators may not have a direct relationship with shareholders, as their role is primarily legal and formal.	Promoters often interact directly with potential shareholders during the early stages, as they are involved in raising capital and establishing the initial shareholder base.
Ethical Considerations	The ethical considerations for incorporators mainly revolve around legal compliance and accuracy in documentation.	Promoters face broader ethical considerations, including transparency, fair dealing, and honesty, as their actions can significantly impact the corporation’s future and reputation.
Overlap with Other Roles	An incorporator’s role is usually limited to the legal formation process and does not extend into the ongoing management or operation of the corporation.	Promoters may sometimes take on additional roles post-incorporation, such as becoming a director or officer of the corporation, thereby having an ongoing influence on its management and operations.
Historical Context	Historically, the role of the incorporator has been primarily legalistic, facilitating the transition of a business idea into a legally recognized entity.	The role of the promoter has evolved over time, often viewed as a more dynamic and entrepreneurial role, instrumental in the early stages of a corporation’s development and in shaping its initial strategic direction.

If you have questions or want to incorporate a company, please contact our California corporate attorney in Los Angeles to start a business by incorporating a company.

What is a Corporate Promoter?

In corporate law, the terms “promoter” and “incorporator” are frequently invoked; however, the terms are not specifically defined in Corporation Law . The Corporate Securities Law provides some insight into a promoter’s role stating that a promoter is someone taking the initiative to form a corporation. In essence, a promoter is the one who gathers people who are interested in the business, helping to obtain subscriptions, and initiating the process of creating a corporation. This means anyone who acts with the intention of opening a corporation, whether they eventually join the corporation or not.

Someone should be regarded as a promoter if he takes any steps which can impose a duty to protect the interests of those persons who will constitute, after registration, the corporation. It is considered to be this responsibility when the promoter acts on the behalf of the interested parties or if they managed to persuade these people to trust either themselves or persons under their control. Furthermore, if a promoter establishes an enterprise to sell something they have, they also undertake this responsibility. Nevertheless, the fact that the promoter simply negotiates with people who have already assumed the responsibility themselves and are not affected by this promotor, does not create any obligation.

It is noteworthy that any individual whose age and mental capacity legally enables them to enter into a contract can potentially be a promoter. In addition, more than one individual may collaborate in the promotion of a corporation as co-promoters. The process of promoting can also be implemented through agents, and a corporation can serve as a promoter of another corporation.

What is an incorporator?

Although the General Corporation Law does not specifically define the term “incorporator”, use of the word in Corp. Code § 200(b) gives a little insight into what the term means. As per this section, any natural person, partnership, association, or domestic or foreign corporation that forms a corporation under the General Corporation Law by executing articles of incorporation and performing required filings becomes an incorporator of that specific corporation. It should be noted that directors named in the articles do not fall under the category of incorporators and “incorporator” is not a widely used term in the General Corporation Law.

Corporate Promoter vs Incorporator: Whats the difference?

The role of promoters in the formation and organization of a corporation is very important. They are to gather people interested in the enterprise, help to secure subscriptions, and start the process of establishing a corporation. Promoters initiate the much-needed processes and mechanisms that lead to the formation of a corporation.

On the other hand, incorporators are the people, partnerships, associations, or corporations that organize a corporation under the General Corporation Law by signing and filing articles of incorporation. They are the ones who officially create the corporation, completing the necessary legal paperwork and requirements as set forth by the law.

Although promoters and incorporators may have overlapping roles, they serve different purposes in the process of corporate formation. Promoters are essentially the ones who lead and start the formation of the corporation while incorporators play the role of carrying out the necessary legal procedures of establishing the corporation.

The Legal Effects of Being a Promoter or Incorporator

Being a promoter or incorporator involves some legal implications and responsibilities. Promoters take the responsibility of safeguarding the interests of those who participate in the creation of the corporation. This obligation applies to them where they stand in for the interested parties, become trustworthy by themselves or through individuals within their control, or establish a company in order to sell something they own. Promoters need to act in the children’s best interests and should ensure transparency of their actions throughout the formation process.

On the other hand, incorporators carry out and file the articles of incorporation that legally form the corporation. That ensures that all the legal requirements are met and that the creation of the corporation is done according to the General Corporation Law. Incorporators are very important in that they ensure the legality and legitimacy of the corporation’s formation .

Both promoters and incorporators must know the legal responsibilities and comply with the law. Failure to honor these responsibilities can lead to legal action and possible liability.

Conclusion

Promoters and incorporators are essential to the formation and establishment of corporations. Although the General Corporation Law does not provide specific definitions of these terms, their functions and responsibilities play a crucial role in the incorporation process. Promoters lead the way in assembling interested parties and initiating the creation of a corporation while incorporators perform the legal necessary to create the corporation. Understanding the roles of promoters and incorporators and the implications of the laws on them is essential for those participating in corporate form building to ensure adherence to the appropriate laws and rules.

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What are the differences between incorporator and corporate promoter?

What is a Corporate Promoter?

What is an incorporator?

Corporate Promoter vs Incorporator: Whats the difference?

The Legal Effects of Being a Promoter or Incorporator

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