Articles of incorporation help an incorporation legally recognize their business entity. This document can give liability protection to the owners, provide basic business information, and declare the business’s purpose.
- What Are Articles of Incorporation?
- What Is an Incorporated Business?
- Key Terms to Know for Articles of Incorporation
- What to Include in Articles of Incorporation
- How to File Articles of Incorporation
- What Happens After You File Your Articles of Incorporation?
- Articles of Incorporation vs. Other Documents
- Articles of Incorporation Sample
What Are Articles of Incorporation?
Articles of incorporation are formal documents containing the basic information necessary to form an incorporated business (or corporation). These company formation documents provide information on the business’s incorporators, registered agents, directors, and officers. It also declares the purpose, states the operating location, and defines the company’s termination, if applicable.
Once the owner files the articles with their jurisdiction’s Secretary of State, the company becomes a registered business entity within the state for accounting and tax purposes.
Use an amendment of articles of incorporation if you wish to change your corporation’s articles.
What Is an Incorporated Business?
An incorporated business is a legal entity an individual creates and registers as a corporation with the government. Some key elements of an incorporated business include the following:
- Formal governance: Incorporated businesses have formal governance structures, including bylaws that describe the procedures and guidelines for the company’s internal operations.
- Ownership through shares: Shares of stock represent ownership in a corporation. Shareholders own the corporation, and the corporate bylaws outline their responsibilities and rights as owners.
- Board of directors: Shareholders choose a board of directors to oversee the company’s policies and major decisions.
- Perpetual existence: Corporations exist indefinitely, even through organizational or structural changes. For example, a company will persist even if the initial board of directors no longer serves. However, an incorporator can define a termination period in the articles of incorporation if termination is a part of their plan.
- Separation as a legal entity: An incorporated business is a separate legal entity, meaning the corporation itself (instead of its owners) incurs debts, enters into contracts, and purchases property.
Pros and Cons of Incorporating a Business
Explore some of the pros and cons of incorporating a business:
Pros
- Limited liability protection
- More options for raising capital (through bonds or stocks to investors)
- Potential tax advantages
- Simple transfer of ownership
- Prestige and credibility
- Perpetual existence
Cons
- More complex and formal paperwork process than other business types
- More intricate ownership and leadership structure
- The potential of double taxation
- Less flexibility in profit allocation
- Strict regulations and reporting requirements
Search Corporations & Business Entities by State
If you want to start a corporation, you must choose a unique name. Ensure your preferred company name is available to minimize the chances of your state rejecting your articles of incorporation.
We’ve compiled each state’s online business search database for your convenience.
If you don’t file articles of incorporation and wish to remain an unincorporated business, the law will treat you and your business as one entity, meaning it will view you as a sole proprietorship. As a sole proprietor, creditors can go after your personal and company assets for business debt.
Key Terms to Know for Articles of Incorporation
Here are some key terms to know when creating articles of incorporation:
- Registered agent: A registered agent is the person or business receiving the corporation’s legal notices and paperwork. They often have a physical residence in the corporation’s state and an established mailing address. Most states let you designate a natural person, state resident, corporation, limited liability company, limited liability partnership, or statutory trust as your registered agent.
- Incorporator: The person who prepares and signs the articles of incorporation and files them with the Secretary of State.
- Principal place of business: The corporation’s principal place of business is where the company conducts its primary operations.
- Authorized capital: The amount of stock the new corporation will issue. It also determines the corporation’s worth.
- Officers: The individuals who hold executive positions and manage daily business affairs.
- Business purpose: A statement of what your business plans to do as a corporation. Please use an open-ended and broad statement of purpose containing any lawful activity in case you expand your operations.
What to Include in Articles of Incorporation
Here are the elements to include in your articles of incorporation:
- The state’s laws that will govern the document
- The corporation’s full legal name (ensure it’s unique from other business entities in your state)
- The principal place of business (including the street address)
- The name and address of the initial registered agent
- The purpose of the incorporated company
- Authorized capital (including the total number of authorized shares, type of stock, and par value)
- The directors’ names and addresses
- The officers’ names and addresses
- The incorporator’s name and address
- The length of time the corporation will exist (“perpetual” or with an established end date)
- The date you’re executing the agreement
- The incorporator’s name and signature
Use a stock certificate when issuing corporate stocks to your corporation’s owners.
How to File Articles of Incorporation
Creating a corporation lets your business take advantage of the corporate tax and legal benefits that your state offers. But first, you must file articles of incorporation with your state’s Secretary of State.
The requirements and fees vary between states, but the general process is similar.
Review these three simple steps to learn more about the filing process:
Step 1 – Conduct a Business Entity Search
You can search online through your state’s Secretary of State website to check whether your preferred company name is still available. Ensure to include a corporate suffix at the end of the name, such as “Company,” “Co.,” “Incorporated,” or “Inc.”
Step 2 – Determine Your Tax Structure
There are two main tax classifications for corporations: S and C corporations. Specific federal and state requirements are necessary to register as an S-Corporation [1] . Otherwise, all incorporated corporations will start as C-Corporations.
You need to ensure that when you pay taxes, you aren’t getting your business taxes confused with your personal taxes. Visit IRS.gov for more information.
Step 3 – Fill Out Your Articles
Fill out your articles with your corporation’s key information. Discuss the details with your company’s founding members to ensure everyone agrees on the details.
Step 4 – Submit Articles to the Secretary of State
Once you have filled out your formation documents, you must file the articles of incorporation with the Secretary of State’s office where you wish to register. Prepare to pay a filing fee, which can range between $50 to several hundred dollars, depending on your state.
Remember that your business doesn’t need to operate exclusively in the state where you incorporate. However, many states require companies to file “foreign registration” documents if they are an out-of-state entity incorporated elsewhere and doing business in their state.
What Happens After You File Your Articles of Incorporation?
Just filing your articles of incorporation doesn’t let you start running and maintaining your company. You must take other steps, which include the following:
- Write your bylaws. Write your bylaws to establish your corporation’s internal operations.
- Obtain a certificate of good standing. Acquire a certificate of good standing to prove your existence as a corporation and verify its status.
- Keep records. Any time your business meets, ensure you take corporate minutes to document the discussions at these meetings. You can also prepare statements of information and annual reports to provide your state with updated information about your business.
- Remain compliant. Comply with legal obligations and guidelines and ensure your business pays the taxes it owes when tax season comes around.
Articles of Incorporation vs. Other Documents
Compare articles of incorporation with other similar documents:
Articles of Incorporation vs. LLC Operating Agreement
Business owners file articles of incorporation with their state to create a corporation. LLC owners create LLC operating agreements to outline their company’s operating procedures and structure. They don’t usually file this document with any state government. Instead, they store it as an internal document to reference if disputes or challenges arise.
Articles of Incorporation vs. Corporate Bylaws
Corporate bylaws are internal documents for corporations. They dictate the corporation’s operating procedures and outline rules for the company’s management to follow. Some states require a company to create and maintain corporate bylaws, while others only recommend it.
The initial directors typically adopt the corporate bylaws.
Articles of Incorporation vs. Business License
A business license lets a company operate within a regulated industry or jurisdiction. For example, companies that plan to sell alcohol, firearms, or agricultural products will often have to seek a business license before they can start conducting their operations.
Getting a business license and filing your articles of incorporation are usually separate processes. Usually, incorporators file their articles of incorporation first. Then, they apply for a business license if necessary.
Articles of Incorporation vs. Business Plan
A business plan is another internal document individuals can use to outline the strategy of any business type, whether it’s a sole proprietorship, partnership, LLC, or corporation. Owners can store this document internally and share it with lending institutions, investors, and customers to raise capital or otherwise promote transparency.
It contrasts with the articles of incorporation, as the latter only contains information for legal requirements instead of strategic reasons.
Articles of Incorporation vs. Articles of Organization
While filing articles of incorporation leads to the formation of a corporation, filing articles of organization leads to the formation of an LLC upon approval. The latter outlines similar information to the articles of incorporation, including the company’s name, management structure, and limited liability nature.
Articles of Incorporation Sample
Download a free articles of incorporation template in PDF or Word format below:
