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If you’re a new business owner (or corporation head) looking to establish your organization, there are several legal considerations to keep in mind.
One of the more critical considerations is the production of articles of incorporation or legal documents that formally enable an organization to benefit from liability protections.
Understanding and submitting articles of incorporation for your business can be confusing, but we’re here to help!
This article aims to demystify articles of incorporation so that you can confidently handle these documents within your chosen business structure.
Let’s get started!
- Articles of incorporation is an important legal document that makes your business robust in terms of management, financial status, and liability.
- You can draft an articles of incorporation document yourself, but it is best to speak with an attorney before you do so.
- Filing an article of incorporation document can vary depending on the state of operation, so check in with your local legislature.
- Articles of incorporation and articles of organization are different for several reasons.
What are Articles of Incorporation?
Articles of incorporation documents are the cornerstone of corporate liability and structure.
The articles of incorporation of a company, combined with other documents, form the basis of its constitution.
Therefore, in the event of a legal or financial hardship, your articles of incorporation clearly outline procedures for your business.
Articles of incorporation are filed with the state that your company operates in, which is added to the broader Small Business Association (SBA).
If you would like to see an example of what your articles of incorporation may look like, click the link here!
Articles of Incorporation Examples
Let’s say that you want to establish your new business.
When drafting your articles of incorporation, you will want to include all of the following business details:
- Company name
- Purpose of company
- State of registration
- Duration of company life
- Stock ownership,
- Board of Directors (names)
- Indemnification clause.
An indemnification clause is important for company liability purposes. This clause offers financial protection to parties (employees, etc.) for certain damages or expenses incurred.
Importantly, this is not an exhaustive list; it’s wise to consult with an attorney when drafting this document.
Filing Articles of Incorporation
Depending on the state that your business operates in, you will need to adhere to different rules. Generally, to file articles of incorporation, head over to the SBA website and submit them there.
Through the SBA, you can fill out most of the important paperwork for your business. For example, this is where you’ll be assigned a federal tax ID number.
For all other inquiries, search for your state or local government website and submit your business name there.
However, some business structures require more assistance, which is why hiring an attorney might provide the extra support that your business needs to produce and submit this document.
Articles of Incorporation Requirements
To ensure that your articles of incorporation are legitimate, there are multiple prompts that should be included.
Although a small list was provided earlier, here is a more detailed breakdown of the requirements:
Name of corporation
The name of your corporation should be one of the first statements within your articles of incorporation.
This information will make your company easily identifiable in any future documentation.
Prior to choosing a name for your company, ensure that no one else has established a company with that name before.
Otherwise, you could end up with a cease and desist letter.
Name and address of the registered agent
Next, provide the name and address of the registered agent or the person who has been designated as the legal representative/point of contact for the document.
If there are concerns about the document (or if the document needs to be accessed for any reason), this person needs to be contactable.
Type of corporate structure
Following that, you’ll want to disclose the corporate structure that you have decided to follow.
If you do not have any employees/partners beyond yourself within the hierarchy of your company, you can file as a sole proprietorship.
Names and addresses of the Board of Directors
Next, it is advisable to identify the board of directors for your company, which should be established prior to drafting an articles of incorporation document.
The Board of Directors is chosen by shareholders in publicly traded companies to provide insights into business strategy and to uphold the interests of shareholders.
Number and type of authorized shares
Authorized (or issued) shares are the maximum number of shares of stock that a corporation is authorized to distribute, and this is important financial information to include in your document.
Authorized shares can include preferred stock, common stock, restricted stock, treasury stock, and more.
For example, common stock is usually given to the general public.
Duration of the corporation
The duration of the corporation refers to the amount of time you expect to be in business.
For most corporations, the anticipated duration is indefinite, but this still has to be disclosed.
Name, signature, and address of incorporator
Finally, it’s time to sign and date the articles of incorporation document so that it can be submitted and seen as legally binding.
Articles of Incorporation vs. Articles of Organization
Below is a table that defines the differences between articles of incorporation and articles of organization.
In summary, both of these articles are important, depending on your business structure and goals.
|Articles of Incorporation
|Articles of Organization
|Utilized when creating a corporation that is completely separate from shareholders (for example, a C corp)
|Utilized when forming an LLC (combines corporations and partnerships under one legal entity)
|The Board of Directors and shareholders define ownership
|Members (owners and managers) define ownership
|Limited liability provided to shareholders
|Limited liability provided to members
Congratulations on making it to the end of this debrief on articles of incorporation.
Hopefully, you now feel more well-versed in the legal jargon within this document type.
If you still have burning questions, it might be helpful to retain an attorney who specializes in business formation and law – particularly for businesses in your state.
You’re now one step closer to establishing your business or corporation!
What are the benefits of filing articles of incorporation?
To summarize all of the above points, the main advantage of filing articles of incorporation is that it establishes your business as a robust legal entity with a defined corporate structure.
How long does it take to write articles of incorporation?
It is important to set up a meeting prior to writing articles of incorporation to discuss everyone’s role in the company, the corporate structure choice, and other important factors.
As long as that meeting is efficient, drafting articles of incorporation will be a breeze.
Once you submit your articles of incorporation, there is usually processing time (no longer than 2 weeks) for the document once it is received.
What is the purpose of having articles of incorporation?
The purpose of having articles of incorporation is to have greater protections (in terms of liability) and a defined constitution that your business has to abide by.