Articles of incorporation are a legal document you file with the secretary of state to officially form a corporation. When you decide to incorporate your business, completing and submitting this document is a mandatory step. It establishes your business as a legal entity with certain rights and responsibilities.
The process of incorporation dates back several centuries and has evolved significantly over time. Originally, corporations were established through specific legislative acts. However, the modern process has become more streamlined, making it accessible to a wider array of businesses, including small businesses and startups.
By filing the articles of incorporation, you are providing the state with necessary and basic information about your business, such as the corporation’s name, the names of the board of directors, and contact information.
Additionally, it details the business purpose, corporate structure, and the number of shares of stock the corporation is authorized to issue. The document also specifies the duration of the corporation if it is not perpetual.
Filing articles of incorporation comes with associated costs, commonly referred to as a filing fee. The pricing of this fee varies by state. Some states, like Delaware and California, have become popular choices for incorporation due to their favorable business laws and tax advantages.
As public records, articles of incorporation are accessible to anyone seeking information about your corporation. This transparency provides clarity and establishes trust among potential investors, customers, and other stakeholders.
What Is Included in Articles of Incorporation?
As we mentioned, articles of incorporation include key information about your company, such as the following:
Company Name
The articles of incorporation must clearly state the legal name of your corporation. This name must be unique and distinguishable from any other registered business entity within your state.
Entrepreneurs need to conduct a thorough search through the state’s website or other available resources to ensure their preferred business name is available. Taylor Fike, Partner at Fike Advisors and Expert Contributor for Mosey, notes that “You can also file, in most states, an alternative business name, DBA (doing business as), to give a business more flexibility in your activities.”
Company Legal Structure
You must specify the type of corporation you are establishing, like a C-corporation or a nonprofit corporation. This section outlines the corporate structure, helping to establish the legal and tax framework for your business.
As a note, if you’re establishing a limited liability company (LLC), articles of incorporation don’t apply — instead, you’ll need to file articles of organization.
Purpose of the Company
Articulating the business purpose is a critical component of both your success as a company and the articles of incorporation. This purpose outlines the core activities and mission of your corporation, providing clarity on what you intend to achieve.
Even if your state allows for a general purpose clause, being specific helps you ensure you understand your compliance requirements and helps you gain additional stakeholders.
Contact Information
Contact information for both the corporation and the registered agent must be provided. The registered agent acts as the designated recipient for legal documents and government correspondence on behalf of your corporation.
Ensuring accurate and up-to-date contact information is crucial for maintaining good standing with the state government, so you may have to file a specific form if you change your registered agent.
Names of Operating Managers and Directors
The articles of incorporation should also include the names of the individuals who will be managing the corporation, particularly the initial board of directors.
These individuals play a vital role in the governance and strategic direction of the corporation, and their identification in legal documents establishes their official association with the business. “While this may not be important internally in your company when it comes to decision-making in certain departments, this is very important if your company wants to apply for anything related to government benefits like grants or assistance programs,” highlights Fike.
“If you have a change in leadership in your company you will need to look closely at who is considered an operating manager on your articles of incorporation.”
Share and Stock Information
Corporations intending to issue stock need to share details such as the number of shares they are authorized to issue, as well as the types of stock and their respective values. This information is integral for potential investors and for the corporation’s financial structuring.
Signatures of Incorporators
To validate the articles of incorporation, the signatures of the incorporators — the individuals responsible for executing the document — are required. Signing is a formal acknowledgment and agreement to the articles of information and declarations made within the document.
Why Are Articles of Incorporation Important?
The articles of incorporation serve as a foundational legal document that not only helps your business operate legally but also enhances the credibility and professionalism of your business. This is instrumental in building trust with customers, investors, and other stakeholders.
Here are a few other reasons why a company’s articles of incorporation are important:
Establishing Legal Existence
Filing the articles of incorporation is the first step in bringing your corporation into existence. This process transforms your business from an idea or informal operation into a recognized legal entity separate from its owners.
Limited Liability Protection
The articles of incorporation are key in establishing this protection, as they create a clear distinction between the personal assets of the owners and the assets of the corporation. This separation is essential in protecting personal assets from business debts and liabilities.
Raising Capital
Corporations have the unique ability to raise capital through the sale of stock. The articles of incorporation specify the number of shares the corporation is authorized to issue, paving the way for investment opportunities. This can be particularly advantageous for any small business seeking to one day grow into a publicly traded company.
Compliance and Governance
The articles of incorporation lay out the governance structure of the corporation, including the roles and responsibilities of the board of directors. This helps establish clear lines of authority and decision-making, ensuring that the business operates efficiently and in compliance with applicable laws and regulations.
Simplifying Business Transactions
Because a corporation is a separate legal entity, it can enter into contracts, own property, and conduct business in its own name. The articles of incorporation facilitate these activities, providing a clear legal basis for business activities.
Streamlining Administrative Processes
Filing the articles of incorporation can simplify various administrative processes, such as opening a bank account, applying for business licenses, and setting up contracts. These processes are always more straightforward when there is clear documentation of the corporation’s existence and structure.
Providing a Basis for Bylaws
The articles of incorporation serve as a foundation upon which the corporate bylaws are built. The bylaws detail the internal rules and procedures for the corporation, clarifying the roles and expectations for everyone involved in the business.
How To File Articles of Incorporation
Because filing articles of incorporation is one of the first pivotal steps to formalizing your business, it’s crucial to do it right.
- Find the secretary of state office: The first step is to go online to find the information of your chosen state’s secretary of state office. This office is the primary point of contact for this process, holding the key to your business’s formal recognition. You can also check with the secretary of state to confirm whether your business name is available.
- Research state requirements: Research your chosen state’s incorporation requirements, paying attention to specifics around the corporate name, board structure, and share distribution.
- Prepare and submit documents: Use available state templates to draft your articles of incorporation, ensuring accuracy in all details. Submit the documents to the secretary of state’s office with the necessary filing fee, which varies by state.
- Wait for confirmation: Processing times can vary, but once approved, you’ll receive a certificate of incorporation, marking your business as an official legal entity. This is also when you’ll receive a Federal Employer Identification Number.
Given the legal intricacies of incorporation, you may want to consult with a business attorney throughout the process.
Do You Need Articles of Incorporation for an LLC?
Navigating the legal landscape of business ownership requires a clear understanding of your chosen business structure and its requisite documentation. For business owners leaning toward forming a limited liability company, it’s important to note the unique process involved.
Articles of Organization
Unlike corporations, LLCs file articles of organization outlining essential business details like its name, purpose, and management structure. This document serves as your LLC’s official charter and is crucial for legal operation.
Name and Identification
Ensure your LLC’s name adheres to state guidelines. Upon approval of your articles of organization, your business will receive a unique identification number, affirming its legal entity status.
Operating Agreement
Though not a direct substitute for articles of incorporation, an operating agreement is vital for detailing your LLC’s internal structure and member roles.
Simplified Forms
Many states offer standardized articles of organization and articles of incorporation forms, facilitating a more straightforward filing process.
While LLCs don’t file articles of incorporation, their establishment requires specific documentation that fulfills a similar purpose in legitimizing the business and providing a clear legal framework.
What Comes Next?
Once you file your articles of incorporation, your business is officially up and running. From now on, you need to consistently ensure you remain on solid legal ground. That’s where Mosey comes in, offering a dependable solution to manage your ongoing compliance needs.
Mosey is a comprehensive platform that actively monitors your business’s compliance, helping you adapt to any changes or growth your company experiences. Our system offers clear guidance tailored to your unique business specifications and ensures that all of your registration and filing requirements are managed efficiently in one central location–whether you’re an LLC or corporation.
Mosey not only simplifies the complex world of compliance, but also affords you the peace of mind to focus on completing your goals — take the next step in securing your business’s future and discover the ease of compliance with Mosey.
