Date of this Version
A growing number of farm and ranch owners are incorporating their farm or ranch businesses. In many instances, the farm or ranch operation has been incorporated primarily for estate planning purposes. Others have incorporated for income tax advantages, to limit liability, or for other reasons. The privilege to operate as a Nebraska based corporation is granted by the Nebraska Business Corporation Act. The Act requires an annual meeting of shareholders, election of directors, separate recordkeeping of corporate transactions, and the filing of annual reports4 with the State of Nebraska. Faih.,!re to comply with these statutory requirements can result in revocation of a corporation's charter, loss of limited liability, and unfortunate income tax consequences for the shareholders. The two documents which provide for corporation establishment and management are the articles of incorporation and the by-laws. The articles of incorporation comprise the formal charter of the corporation; they set forth the general purposes and powers of the corporation. Corporate by-laws are enacted by the shareholders or directors to regulate the everyday internal affairs of the corporation. The basic provisions for the articles of incorporation and by-laws are contained in the Nebraska Busi ness Corporation Act. In certai n instances, the Act serves only as a guideline and can be changed by agreement among the shareholders. In other instances, the provisions of the Act are mandatory and cannot be changed. For example, the Nebraska statutes require that there be a board of directors to manage the affairs of the corporation. The board of directors cannot be dispensed with in the articles or by-laws. On the other hand, the statutes require that at least a majority vote is needed to elect a director to the board. However, the shareholders can provide for a greater-than-majority vote in the articles or by-laws. Within a certain framework, the shareholders are, therefore, able to structure the control, management, and operation of the corporation to fit their individual needs. These requirements are the same for all corporations regardless of the type of business activity, whether it be farming, ranching, or manufacturing. They apply equally to publicly-held and closelyheld corporations. I n a closely held corporation, the shares of stock are owned by a limited number of shareholders. Since the entire stock issue is often held by one family, there is little, if any, public trading of the stock. The typical family farm or ranch corporation is a closely-held corporation. In contrast, a publicly held corporation, such as General Motors, offers its shares of stock to the general public. The purpose of this publication is to explain the contents of the articles of incorporation an'd by-laws of a corporation organized under Nebraska jurisdiction. The material is organized in a manner similar to that which would be found in an actual set of articles of incorporation or by-laws with one important exception. It does not contain the actual wording that would be found in these two documents. The advice and service of a lawyer are indispensable to the actual drafting of the articles of incorporation and by-laws.