Promoter Law and Legal Definition

A promoter is a person whostarts up a business, particularly a corporation, including the financing. The formation of a corporation starts with an idea. Preincorporation activities transform this idea into an actual corporation. The individual who carries on these preincorporation activities is called a promoter. Usually the promoter is the main shareholder or one of the management team and receives stock for his/her efforts in organization. Most states limit the amount of "promotional stock" since it is supported only by effort and not by assets or cash. If preincorporation contracts are executed by the promoter in his/her own name and there is no further action, the promoter is personally liable on them, and the corporation is not.

Promoters perform the following in the formation of the corporation:

  • They seek business opportunities.
  • They raise capital.
  • They find investors and encourage them to enter into stock subscription agreements.
  • They enter into contracts on behalf of the corporation to be formed.
  • They cause the articles of incorporation to be prepared, in which process they select the state of incorporation, select a corporate name, or plan special charter provisions to be included.