Starting a business from scratch demands a lot, especially with the legal issues, which can be quite confusing to many. Coming up with a business idea can be hard enough, but then comes the countless legal documents that you will have to fill out and the technicalities that you will have to overcome, especially if you are looking to structure your company as a corporation. In this article, we will be looking at some of the things you have to know about and the important steps you have to take to incorporate your business/filing your incorporation articles properly.
What are the Articles of Incorporation?
Articles of incorporation, also referred to as the “articles of association” or the “corporate charter,” are a set of formal documents filed with a government body to document the creation of a corporation officially. Such articles contain pertinent information such as the business’s name, street address, the amount and the type of stock to be issued, and the service process agent.
Difference Between Articles of Incorporation and Bylaws
Articles of incorporations are almost always confused with bylaws, which outline the rules and regulations that help govern a firm and help to establish the roles and duties of the company’s officers and directors. Bylaws usually go hand in hand with the articles of incorporation to form a legal backbone of a business.
Why the Articles of Incorporation are Important?
Articles of incorporation are important as they help establish a firm within its home state, informing the state of the key elements of the business. When filing the articles of incorporation, the owner of the business lets the state know that the purpose of their business, as well as the name, address of the registered agent, the names of any incorporators, and the number of authorized shares and amounts of common stock.
Business owners usually benefit from articles of incorporation in various ways. By registering your business and making it a legal corporation, you protect yourself from the company’s debts and be able to raise capital quickly through the sale of stock or shares.
Components of Articles of Incorporation
Most articles of incorporation include the following information, with some variation depending on the state you are in and the type of business:
- The name of your corporation of business
- The official name and address of your corporation’s registered agent, i.e., the person or company to whom all vital legal and state documents and correspondence will be directed
- The corporate structure may include a designation of whether you will be operating as a nonprofit organization, nonstock organization, etc.
- The official names and addresses of all the members of your business’s board of directors
- The amount and type of authorized shares available to your organization. By authorized shares we mean, the number of maximum shares that your organization can issue, which may include but is not limited to common stock and preferred stock.
- The duration of your business, if not permanent
- Your official name, address, and signature. If you are not the incorporator of the business, you can provide this information on their behalf.
When are Articles of Incorporation used?
Articles of incorporation separate the ownership of the business from their business. They create a separate legal entity for the business, thereby reducing the business owner’s personal risk, as the business becomes liable for its financial obligations and legally responsible in the event of a lawsuit.
Any type of business can file the articles of incorporation. Any business which was structured as a corporation or as a sole proprietorship can file to become a corporation. Smaller businesses usually become S corporations and pay taxes based on their dividends. In contrast, larger ones become C corporations, which pay corporate taxes and must have a board of directors to govern their operations.
Submitting and Filing Articles of Incorporation
After filing the articles of incorporation with your state’s business filing agency, you must pay a fee for submitting your paperwork. The fee usually varies from state to state. Once the corporation is approved, you will then be notified to collect your certificate of formation from the state offices.
Most states also demand that all corporates should have bylaws. Bylaws describe the way a corporation will be operating, including the rights and duties of the directors, officers, and shareholders. Bylaws are internal documents that should be kept together with the other corporate records of a firm. They are not filed with the state.
Making sure that all your articles of incorporation are well filed is the first step toward incorporating your business. Ensure that you complete the articles accurately, follow all your state filing instructions, and paying the required fee, and you will be good to go.
Download Free Articles of Incorporation Templates
Articles of incorporation are very crucial documents, and you don’t want to leave out any key information that may be crucial to your business. To ensure that all the information is well captured in the articles, it is important that you seek the help of our professionally designed templates. We have both free and premium templates that you can choose from to help guide you. Download today and get started on filling your articles of incorporation.
Articles of Incorporation Template (Non-Profit)
Articles of Incorporation Template for Word
Frequently Asked Questions
While each business is different and each state has its own rules and regulations, some states simply stand out as the best choices for incorporation. Wyoming, Delaware, and Nevada are ideal for incorporating your business due to their business-friendly rules, knowledgeable courts, and enhanced privacy.
A corporation can be defined as an independent legal entity distinct from its owners. A corporation is generally designed to have its shareholders own and operate the business in a manner that allows for limited liability to only the amount of money that they put into the corporation.
An incorporator also referred to as a promoter, is the individual, association, or corporation responsible for the process associated with the incorporation of a new business.
Filling articles of incorporation offers your company huge benefits, such as tax advantages and protection from creditors. Articles of incorporation are a way that businesses formally and legally acknowledge that they intend to form a corporation. It also details how you plan to structure and run your corporation.
Ensure that you filed the articles of incorporation correctly and submitted them by registered mail or in person at the secretary or department of state’s office or electronically on the department of state’s website, depending on your state.