When you’re ready to incorporate your venture, take the time to understand what is included in the articles of incorporation.
This article will introduce you to the concept, go through what’s included in them, and show you how to get your business’s articles of incorporation.
Starting a business is a big step, and the legal issues that come with it can be complicated.
It’s challenging enough to come up with a business concept in the first place.
But then you have to deal with the many legal documentation and formalities. Particularly if you’re establishing a corporation.
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The first and most important things you need to know about incorporating a business are:
- Any business owner who wants to create a new or existing company as a professional corporation, nonprofit corporation, or other categorization must file articles of incorporation.
- Authorities will carefully analyze your application and confirm its status once all fees have been paid and all other requirements have been met.
- For filing articles of incorporation, each state has its own set of requirements and procedures. The secretary of state is in charge of all filings.
Here is the content that we will cover in this post. Let’s get started.
- 1. What are the articles of incorporation?
- 2. The importance of the articles of incorporation
- 3. What is in the articles of incorporation?
- 4. Name of the Company and its Primary Location
- 5. The Registered Agent’s Name and Address
- 6. The Corporation’s Directors’ Names, Addresses, and Signatures
- 7. The Incorporator’s Name, Address, and Signature
- 8. The Number of Authorized Shares
- 9. Corporate Purpose
- 10. Corporate Structure
- 11. Duration
- 12. Fee’s
- 13. Articles of Incorporation – When to Use Them
- 14. Articles of Incorporation Vs. Articles of Organization
- 15. Completing the Forms
- 16. Submitting Your Forms
- 17. Cost
- 18. Conclusion
What are the articles of incorporation?
Articles of Incorporation are a series of legal papers that establish a company’s formation in the US and Canada.
To be legally recognized as a company, a business must submit these documents with the Secretary of State or company registrar
They’ll submit the paperwork in the state where it wishes to conduct business.
Due to their attractive tax benefits and regulatory regimes, several jurisdictions, attract a high number of businesses wishing to incorporate.
Some good examples include Nevada and Delaware,
Your articles of incorporation is also known as a company’s letters, corporate charter, or certificate of incorporation.
This is a legal document that establishes the legal status of your company.
Bylaws spell out the rules and regulations that govern a corporation and assist to determine the roles and responsibilities of the company’s directors and officers.
But they are often confused with articles of incorporation.
The legal backbone of the company is formed by the bylaws, which work in tandem with the articles of incorporation.
Also, the articles of incorporation should not be confused with the articles of organization.
They are used to form a limited liability company (or LLC); more on that later.
The place where you file this document varies, so keep reading to find out where you can file it.
You’ll also learn how much it costs, and what’s included in the articles of incorporation.
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The importance of the articles of incorporation
Articles of incorporation are crucial since they establish an organization while also informing the state of the organization’s core characteristics.
The goal of the business, the number of authorized shares and amounts of common stock, the name and address of the registered agent together with the names of any founders are all included in the filing.
Some states will additionally ask for a copy of the company’s bylaws.
By specifying the rights and obligations of the shareholders and board of directors, the bylaws assist in the smooth operation of a business.
Articles of incorporation help a company owner in a number of ways.
You can protect yourself from the company’s debts and also raise funds after incorporation by selling shares.
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What is in the articles of incorporation?
The following information is included in the articles of incorporation, with some differences by state.
Name of the Company and its Primary Location
The articles of incorporation must contain the name under which it will do business in order to be incorporated.
To make the corporate structure clear, the name must contain a corporate identifier, such as the phrases “Inc.” or “Incorporated.”
A physical location may be necessary depending on the state, so it’s also a good idea to provide the company’s main office address.
The Registered Agent’s Name and Address
The primary function of a corporation’s registered agent is to accept service of process (sometimes known as “being served”). That is in the event that the company gets sued.
For the company to stay in accordance with state rules, the registered agent also gets important letters from the state about the filing of corporate papers and tax notices.
The registered agent does not have to be a corporate official or employee.
Sometimes a third party, such as a lawyer, can serve as the registered agent.
Regardless of who is selected, they must be accessible during normal business hours.
Furthermore, the registered agent must be based in the state in which the organization was formed.
The registered agent may change at any time throughout the corporation’s existence.
However, unless the state is notified of the change, the business risks:
- Losing its good standing
- Being punished for noncompliance
- Being administratively liquidated
The Corporation’s Directors’ Names, Addresses, and Signatures
The corporation must establish a board of directors, which is the group of people responsible for the administration of the company.
In certain states, the board members or corporate officials, as well as their addresses and signatures, must be included in the articles of incorporation.
The Incorporator’s Name, Address, and Signature
The incorporator is responsible for submitting the articles of incorporation.
As well as any other corporate documents that are required before the company can be properly registered with the state.
This is a temporary position. The incorporator’s official responsibilities end once the business is registered.
The Number of Authorized Shares
The number of authorized shares is the number of shares that have been granted.
Companies must state the maximum number of authorized shares they are allowed to issue under the law.
The total number of authorized shares and the number of issued and outstanding shares are not the same.
The total number of authorized shares refers to the total number of shares that can be granted, regardless of whether they have been issued.
The number of shares that have already been issued is referred to as issued and outstanding shares.
The total number of issued shares must be less than the total number of authorized shares.
Some states may additionally require the company to disclose if it has the authority to issue multiple stock classes.
Shareholders have different rights depending on the kind of stock they own.
Class A shares, for example, may have different or extra voting rights than Class B shares.
Different kinds of shares are not issued by all businesses.
The purpose of the company must also be stated in the articles of incorporation.
However, in most states, the purpose does not need to be stated in any detail.
Because a company’s mission might evolve and alter, it’s preferable to keep the corporate mission broad.
In many states, just stating that “the corporation’s purpose is to engage in any legitimate activity for which companies may be established in this state” is sufficient.
The corporate structure must be explicitly stated in the articles of incorporation.
Depending on the state, the following types of structures can be used.
- Non-profit: A non-profit organization does not issue stock. Its mission is to assist the general public rather than make money for its owners or shareholders.
- Closely held: A company in which a small number of people own the bulk of the stock.
- Professional: A type of company that is permitted by state law and is made up of specific types of professionals. Attorneys, accountants, and those in the performing arts for example.
- Stock: A form of for-profit business that raises funds by issuing stock to stockholders, with each share of stock representing a share of ownership in the company.
- Non-stock: A non-stock company does not issue shares. These businesses are often non-profits.
The duration of incorporation refers to how long it will be in operation.
You should specify if the corporation is being incorporated for a limited period of time. A company will exist indefinitely if there is no set time limit.
You should set this to “perpetual”, which is the default duration in many states.
A filing fee must be paid when the business files the articles of incorporation. The amount varies greatly across states and business models.
Following the establishment of their corporate standing, some businesses may wish to change their articles of incorporation.
A restatement, also known as restated articles of incorporation, may be used to accomplish this.
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Articles of Incorporation – When to Use Them
Articles of incorporation separate the founder of the business from the business itself.
They incorporate the business as a separate legal body.
Incorporating a business lowers a business owner’s personal risk by making the company itself financially accountable for its liabilities. And legally responsible in the event of a lawsuit.
Articles of incorporation may be filed by any type of business.
A new company may start as a corporation, or an existing sole proprietorship can become a corporation later.
Smaller firms normally form S-corporations and pay only dividend taxes.
But larger enterprises often form C-corporations, which must pay corporate taxes and have a board of directors.
Articles of Incorporation Vs. Articles of Organization
There is one major distinction between the articles of incorporation and articles of organization:
Articles of incorporation are for businesses that want to become a corporation, while articles of organization are for limited liability corporations (LLCs).
These are classified differently under the Internal Revenue Code.
The benefits of forming a limited liability company (LLC) include legal and financial protections for the business owner.
For businesses that expect to have real estate holdings or other assets that fluctuate in value, LLCs are usually preferred over corporations.
LLCs, like corporations, offer tax and liability advantages that are governed by the Internal Revenue Code.
You should check your state’s laws and regulations before submitting any legal document.
Articles of incorporation and articles of organization are often used interchangeably in certain states.
Completing the Forms
The first step is to set up your company as a corporation.
The documents vary by state, but each includes several questions about the business and its founders.
The forms are readily available on the internet, but don’t be surprised if they’re not labeled as “articles of incorporation”.
They are also often referred to as “certificate of incorporation”, “articles of association, or “corporate charter“.
Despite state differences, the forms all ask similar questions and have a fill-in-the-blank structure. The information includes:
- The name of the business or corporation.
- The name of the person who will receive all legal notices.
- The purpose and duration of the business.
- The name of the incorporator.
- The name of the directors.
- The number of authorized shares of stock.
- The number of classes of stock the corporation will be allowed to issue.
Submitting Your Forms
Depending on your state, you can submit the documents by mail, in person at the secretary or department of state’s office.
Or online on the secretary or department of state’s website.
The filing cost varies by state, but it usually ranges between $50 and $300. Other fees may be charged at the time of filing, depending on the state.
Once you have completed the forms and paid the fees, the secretary of state’s office will review them.
They’ll ensure that the name isn’t already in use and that all other information fits the state’s criteria.
If everything is in order, the state files the documents, making the company a legal entity.
According to Investopedia, certain states have more advantageous regulatory and tax regimes, which attracts more businesses.
In a nutshell, the articles of incorporation are important because they create a business in its home state.
They also alert the state of the organization’s key characteristics.
They define the shareholder’s rights and obligations, as well as assist in the running of the company.
Now that you know what is included in the articles of incorporation, and the benefits that they provide, it’s time to file yours.
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This article is for informational purposes only. You should consult with your lawyer for legal advice.