Articles of Incorporation are a document that, when filed with the secretary of state, establish the existence of a new corporation. The articles outline basic information about the corporation, including the type of business, and a description of the business’ operational characteristics. The state must approve the Articles of Incorporation before the business can be legally established. To explore this concept, consider the following Articles of Incorporation definition.
Definition of Articles Incorporation
- A set of formal documents filed with a state office in order to legally create a corporation.
What are Articles of Incorporation
The “Articles of Incorporation,” also known as a “Certificate of Incorporation,” or “corporate charger,” is a document required to establish the creation of a new corporation within the United States. The “articles” state the type of corporation, discuss how the corporation will be governed, and spell out the corporation’s bylaws. Articles of corporation are filed in the state in which the corporation has its home office. Because each state has its own laws governing corporations, the exact procedure for obtaining, and required content of, corporate charters are provided by the states.
What is Included in Articles of Incorporation
Articles of Incorporation contain basic information about the new business being established. Certain basic information is required to be included in Articles of Incorporation, regardless of the type or size of the corporation being formed. Failure to provide the required information can cause delays in establishing the corporation. In most states, required information includes:
- Name and Address of the Corporation. The name must not be the same as any other corporation in the state.
- Corporate Purpose. The purpose is often stated in broad language, as being too specific may limit future prospects of the business.
- Registered Agent. The name and address of the corporation’s registered agent, the person who will be authorized to accept legal documents on behalf of the corporation, must be kept current.
- Stock Information. This includes the number of shares to be issued, the type and class of shares, and the value of each share.
- Identity of the Incorporators. The incorporators are those individuals who initiate the creation of the new corporation. These will be the people responsible for signing the incorporation documents. Some states also require the names of the directors to be included in the Articles.
- Limitation of Directors’ Liability. The certificate states the limit to which the corporation’s directors can be held liable for the company’s actions, and specifies what actions the shareholders may take without holding a special meeting.
Because Articles of Incorporation can be very technical, an experienced business attorney may be an asset in drawing up the documents. This type of attorney can also help business owners ensure they are operating their business within the bounds of the law. For those who want to save costs by filing the corporate documents themselves, the Articles of Incorporation may be written without professional help, as long as they contain the required information and abide by the laws of the state in which they will be filed. Often times, state websites have printable forms that can be used. When choosing a template however, users should ensure it is from a credible source to prevent confusion.
Example of Statement of Corporate Purpose
While it is required for every new corporation to state the purpose of the business, it behooves the incorporators to be as broad as possible. For example, Amazon.com’s corporate charter states the purpose of the business to be:
“To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.”
Language similar to this is commonly used in the formation of many corporations in every state of the nation.
It is important to understand that a corporation’s statement of purpose is not the same as its vision statement. A corporate vision statement expresses the ultimate goals of the corporation, such as where the incorporators would like the business to be in 10 years.
Filing Articles of Incorporation
After writing the Articles of Incorporation, they need to be signed by all of the incorporators, and then filed with the appropriate state office, which is usually a division of the Secretary of State. Every state requires a filing fee to be paid at the time of filing. The amount of the fee varies by state, and often depends on the type of corporation being filed. The state office will check the documents to be sure they have been completed properly before issuing the certificate of incorporation. Once the Articles of Incorporation are approved by the state, the corporation is legally registered as a business entity.
Related Legal Terms and Issues
- Business Entity – An organization established and existing apart from any other interest, business or personal.
- Corporation – An independent legal entity owned by one or more shareholders.
- Liabilities – A company’s legal obligations or debts that come up during the course of business
- Jurisdiction – The legal authority to hear legal cases and make judgments; the geographical region of authority to enforce justice.
- Registered Agent – A person designated by a business entity to receive legal correspondence and service of process on behalf of the entity. Also known as a “resident agent” or a “statutory agent,” the registered agent may be an officer of the corporation, an owner of the business, or a third party contracted specifically for that purpose.
- Shareholder – Someone who owns shares in a company. A shareholder, also referred to as a “stockholder,” profits when the company makes money, but also loses money when the company is unsuccessful.