What Are Articles of Incorporation?
Why do you need to file corporate articles?
What are the essential elements you should know!
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What Are Articles of Incorporation
Articles of incorporation refers to a document that a company founder or entrepreneur will need to file with the state to form a company.
In other words, if a person wants to start a business and operate it using a corporation, it must create the corporation by filing its articles of incorporation with the state.
In the United States, every state has its own requirements with regards to the filing of a company’s articles.
When the articles are filed with the state, provided they respect the local regulations and filing rules, the state will eventually approve them and confirm the formation of the legal entity.
Some people may refer to “articles of incorporation” as a certificate of formation, company charter, or letters of incorporation.
In essence, all these terms refer to the same legal document that contains all the basic information required by the state to create a new corporation.
Articles of Incorporation Definition
How do you define a corporation’s incorporation article?
According to Investopedia, articles are incorporation are defined as:
Articles of incorporation are a set of formal documents filed with a government body to legally document the creation of a corporation.
As appears from this definition, company articles refers to:
- A document
- Filed with the government
- To create a corporation
Purpose of Company “Articles”
Why do you need to complete company articles?
A corporation’s incorporation articles are important as they enable the company to be recognized and legally established with a state.
In addition to recognizing the company as an entity that can do business in the state, the company authorities will also have basic information about the company such as its address, registered office, registered agent, name of incorporators, and so on.
That’s why it’s important to properly complete and file your articles to ensure the state has the proper information on your company allowing you to transact business in the state in question.
Entrepreneurs and business owners opt to operate a business under a corporate vehicle as they can take advantage of the limited liability protection offered by the company.
If a company is not legally formed, the business owner may not have adequate liability protection when doing business.
It’s important to ensure that a company files its articles properly and maintains a good standing by filing any ongoing annual reports or documents as needed by the state.
Information Requirements
What information is found in the articles of incorporation?
The “articles” or “charter” of a corporation is a document containing key information about a company to be formed.
Although every state will have a slightly varying requirement, in general, you can expect the article of incorporation to include information such as:
- Company name
- Address of the company
- Purpose of the corporation
- Name and address of the company’s registered agent
- The type of corporation (nonprofit, non-stock, professional corporation etc)
- Name of board members
- Authorized shares
- Duration of the business
- Incorporator’s name and address
On the basis of the information contained in the articles, the state will ensure that the incorporator satisfies the rules and requirements to form a company and will either approve or reject the filing.
Filing Articles of Incorporation
The incorporator (individual or entity filing the articles) needs to file the articles of incorporation along with the associated filing fees with the state where the corporation is intended to be registered (or incorporated).
In most states, the filing is done with the Secretary of State.
In some states, the filing is done with a state agency or an equivalent agency handling company registrations and filings.
Once the state approves the letters of incorporation, it will then issue a certificate for formation confirming the creation and registration of the company with the state.
Once the corporation is formed, many state rules require the corporation to adopt corporate bylaws.
As a result, the initial company directors will need to adopt the bylaws setting out the rights and responsibilities of the company officers, directors, and shareholders.
Generally, the bylaws are not required to be filed with the state and will thus remain an “internal” document kept in the company’s minute book.
Articles of Incorporation vs Bylaws
What are the articles of incorporation compared to company bylaws?
A company’s article of “incorporation” is a legal document setting out the general information about a corporation to be created.
In other words, the articles will contain information such as:
- Corporation name
- Address of business establishment
- Name of registered agent
- Incorporator name
- And other
A corporation’s “articles” should not be confused with a corporation bylaws.
A company bylaws refers to an “internal” document adopted by the corporation setting out the rules and regulations governing the functioning of the company.
For example, in a company bylaw, you will have rules and regulations relating to:
- Procedures to call a shareholder meeting
- Procedures to call a meeting of the board of directors
- Voting procedures
- Election of board members
- And other
The company bylaws and articles of incorporation, together, provide the legal documents and framework based on which a company can operate.
Articles of Incorporation vs Articles of Organization
What does articles of incorporation mean and how is it different from articles of organization?
In substance, ‘articles of incorporation’ and ‘articles of organization’ are both intended to form a legal business entity with the state.
The difference between the two is that you form a “corporation” with an article of incorporation whereas you form a limited liability company (or LLC) with an article of organization.
A limited liability company is a different type of legal entity than a corporation.
A business owner may opt for a limited liability company to benefit from pass-through taxation allowing the LLC members to report the business revenues on their personal income taxes.
Corporations do not offer pass-through taxation by default (unless an election is made to be taxed under the Subchapter S of the Internal Revenue Code as an S-Corporation) and business revenues are taxed in the hands of the company.
In the end, you form a limited liability company by filing the articles of “organization” and a corporation by filing the articles of “incorporation”.
Corporate Articles Takeaways
So, what is “articles of incorporation”?
Let’s look at a summary of our findings.
What Is An Article of Incorporation
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