Articles of Incorporation for a Business
Many businesses decide to incorporate - that is, to form the business as a corporation. In order to begin the process of incorporating, the business must file a form with the state in which does business. This form is called the Articles of Incorporation. In some states, these articles may be called something else. The document may be called a Certificate of Incorporation (as in Delaware) or a Corporate Charter (another general term).
A corporation is a specific type of business that is formed in the state where the company is doing business. To form a corporation, there are specific steps that must be taken and some decisions that must be made. One of the most import steps in incorporating a business in a state is to create Articles of incorporation. The form of these articles depends on the laws of the state. To find out the requirements for articles of incorporation in your state, go to the website of your state's secretary of state and the business division.
What is the Purpose of Articles of Incorporation?
The Articles of Incorporation provide the basic information needed to form the business and register the business in the state. The state needs to know the name of the business, its purpose, and the people who will be in charge. For a corporation, the state also needs to know about any stock the business will be selling.
What Information is Needed for Articles of Incorporation?
The specific articles included in this document vary by state, but the following articles are typically included:
- The name of the corporation: Each state has different requirements for the corporation's name, but in most cases, it must include the term "Inc." or "Incorporated" to specifically designate this business as a corporation.
- The name and address of the registered agent: People need to have someone who can receive important documents and legal papers on behalf of the corporation, so the registered agent needs to be someone who is available all the time during regular business hours. Many businesses hire a registered agent service., but you can be your own registered agent.
- The specific type of corporation: (stock corporation, non-stock corporation, non-profit corporation, etc.) For a stock corporation, the authority of the corporation for an initial issue of a specific number of shares of stock and the price of those shares. You may also want to designate a certain class of shares (Class A, for example).
- The purpose(s) for which the corporation was formed: What is the corporation selling? What type of business is it in? Each state has different requirements and levels of detail for this section.
- The names and addresses of the initial directors: You will need to form a board of directors, and you may have to list the board members or the corporate officers (president, vice president, secretary, treasurer) on the Articles of Incorporation.
- The name and address of the incorporator: (the person preparing the incorporation documents). An incorporator is a person in charge of setting up a corporation. The incorporator files the Articles of Incorporation with the state in which the corporation is registering and filing any other corporate documents needed until the corporation is formally registered and recognized by the state. Other duties of the incorporator might include selecting members of the board of directors or organizing an initial meeting of the board. An incorporator can be but does not necessarily have to be, an attorney. The person designated as the incorporator is listed on the Articles of Incorporation so he or she may be contacted by the state, if necessary. The incorporator has no formal duties once the corporation has been registered with the state.
- The duration of the corporation: either perpetual or for a fixed period of time. Most corporations are set up as perpetual organizations.
How Do I File Articles of Incorporation?
The Articles of Incorporation are filed with the office of the Secretary of State for your state. Then get the help of an attorney to construct the document. Forming a corporation is complicated. While many states allow you to file the articles of incorporation online, it is a good idea to get an attorney to help you with the process of forming a corporation, so you don't miss anything critical.
Is There a General Template for Articles of Incorporation?
Some sections (those described below) are commonly required by most states. But there are many other sections and definitions that may be required by your state. Depending on where you file your articles of incorporation (in which state), you may see different sections. Here's a list of the most common sections:
- Pre-emptive Rights: Initial or current shareholders may have the right to purchase shares in any offering before non-shareholders can purchase. In other words, they can pre-empt others and buy these shares.
- Amending or Repealing Bylaws: The bylaws are the operating procedures for a corporation. They are created as part of the process of incorporation. Procedures for amending or repealing bylaws may be included in the articles of incorporation.
- Fiscal year-end: A company's fiscal year is its financial year. The year-end determines when annual reports are due and when taxes must be paid.
- Indemnification of Officers, Directors, Employees, and Agents: To indemnify means to hold harmless. An indemnity agreement attempts to state that those individuals who make decisions and act on behalf of the corporation should be held harmless from liability.
- Limitation of Liability: This clause is similar to the indemnity clause above. It's sometimes called an "errors and omissions" clause because it states that responsible parties should not be liable for general errors or omissions in their ordinary work.