Discover the essentials of forming a corporation in your chosen state with our comprehensive guide on filing articles of incorporation.
When you decide to start a corporation, there’s a step you can't skip: filing the Articles of Incorporation with the Secretary of State. It’s the official starting line that establishes your business as a legal entity.
Let's break down what you need to know about this document and how to file it properly.
Key Takeaways
The Articles of Incorporation are a business's legal cornerstone, officially registering the venture as a corporate entity.
This document details your business name, purpose, structure, and the shares of stock to be issued, essentially sketching out your corporation's legal DNA.
After filing the Articles of Incorporation, you’ll need to tackle bylaws, obtain licenses, and more as you get your business up and running.
What are Articles of Incorporation?
Articles of Incorporation are a formal declaration to the state that you intend to form a corporation. The document defines the structure of your corporation, like a C corporation, its purpose, and how it will operate within legal bounds.[1]
Typically, the Articles of Incorporation include:
Business name: The company name must be unique within your state.
Business purpose: This defines what your business will do and signals to investors, customers, and partners what your business stands for. If you need to make any changes to your business structure and purpose, you can always do so in the future.
Duration: Some states require you to state how long your corporation will exist, though "perpetual" is a common choice.
Purpose: This outlines the corporation’s main activities and goals.
Business structure: This explains the exact type of corporate structure (profit, nonprofit, non-stock, professional, etc.).
Incorporator details: Name, signature, and address of who is kickstarting the C corp.
Registered agent: This person will handle all legal documents on behalf of your corporation. They must be over 18 years old, have a residence within the state where your business operates, and be available during regular business hours to receive correspondence in the name of your company.
Number of shares: This outlines how much stock the corporation can issue and the number and type of authorized shares.
Board of directors: The names and addresses of your initial board members.
Regarding shares, you may also hear about the class of shares. Class of shares are the different types of company stock, each labeled with letters like Class A, Class B, and so on. Each type has different rules about voting power, dividends, and what happens if the company goes under.
For example, Class A shares might let you vote more often on company decisions, while Class B shares could give you higher dividends. Companies appeal to various investors by offering different levels of control and benefits.
Articles of Incorporation vs. Bylaws
While the Articles of Incorporation and bylaws are some of the most significant documents for your corporation, they serve distinct purposes and come into play at different times.
Articles of Incorporation are filed with the state to legally establish your corporation. The documentation covers the big, public-facing details: your corporation's name, purpose, and basic structure.
Bylaws don't get filed with the state. Instead, they're more like your corporation's rulebook outlining how it will run, covering aspects like the procedure for electing directors, holding meetings, and making decisions.
How to File Articles of Incorporation
First, check with your state's Secretary of State office or the state website for specific guidelines on how to file Articles of Incorporation, as requirements can vary. As outlined above, you'll typically need to provide your corporation's name, purpose, and details about shares and initial directors.
Once you've gathered all the necessary information and covered the fee, you can submit your Articles online, by mail, by fax, or in person, depending on your state's options. The filing fee also varies by state.
After filing, you'll receive a certificate of incorporation, marking the corporation’s official start. This document is the green light to proceed with other steps, like drafting bylaws, holding initial board meetings to establish ground rules, and obtaining licenses and permits.
What Comes Next
After you've filed your Articles of Incorporation and have the certificate in hand, you need to focus on the following:
Drafting Bylaws
Corporate bylaws are a corporation's operating manual. They lay out the rules for governance, meetings, and other internal procedures.
Bylaws should reflect the current state of your corporation along with its future ambitions. While you may always change the trajectory if necessary, try to at least have a broad roadmap. They set the tone for corporate governance, decision-making, and conflict resolution.
Holding the Initial Directors Meeting
The initial directors meeting is a strategic session that lays down the operational and governance foundations of your corporation. This is where you'll appoint officers, adopt bylaws, and conduct other essential startup activities.
This meeting's decisions on officers, bylaws adoption, and other activities will shape the corporation's direction and operational ethos.
Issuing Stock
Issuing stock is a major milestone in defining your corporation's ownership structure. It's a moment to consider the broader implications of share distribution, investor relations, and how these decisions align with your long-term business goals.
This formalizes ownership in the corporation, distributing shares to initial shareholders.
Obtaining Licenses and Permits
Obtaining the necessary licenses and permits, while seemingly bureaucratic, is an opportunity to align your business with legal and industry standards and prove that your business is reputable. Depending on the state, there may be a general business license, However, many specialized industries, like healthcare, food industry, or construction, will be more strict regarding licensing requirements.
Applying for an EIN
The Employer Identification Number, obtained from the IRS, is necessary for tax purposes and to open a business bank account.
Opening a Business Bank Account
It’s a wise idea to open a business bank account to keep your personal and business finances separate and organized.
Filing an Annual Reports and a BOI Report
Complying with state regulations maintains a company’s good relationship with the state law, including filing an annual report each year.[2]
Furthermore, keep in mind that as of January 1, 2024, many U.S. companies are required to get clear about who really owns or controls them by filing a Beneficial Ownership (BOI) report with FinCEN, a part of the U.S. Treasury. This is all thanks to the Corporate Transparency Act of 2021. If you're registering in 2024, you have 90 days from when you officially start to file this information. In 2025, this window will be reduced to 30 days.
LLC vs Corporation
Both an LLC and a corporation have perks as business structures, but it depends on what you’re looking for when starting a company.
An LLC (Limited Liability Company) refers to a flexible business structure with a simple structure and fewer formalities. It offers personal liability protection, pass-through taxation, and easier maintenance. This makes it a popular choice for small to medium-sized business owners looking for a balance between protection and simplicity.
On the flip side, a corporation is strong and structured. It’s a more formal entity with its own tax rates, and it allows for the issuance of stock if you’re looking to raise capital.
Corporations are more appealing to business owners who intend to scale quickly or go public. While both LLCs and corporations offer liability protection, the differences lie in taxation, management structure, and the ability to attract investors.
LLCs have a similar setup document known as the Articles of Organization but with a more casual approach to management and operations.
FAQs
What are Articles of Incorporation?
Articles of Incorporation are the documents you file to legally establish your corporation in the state. They include key details like your business name, purpose, and structure.
What is the difference between Articles of Incorporation and bylaws?
Articles of Incorporation register your corporation with the state while detailing its existence and structure. Bylaws, however, are internal rules outlining how the corporation operates, including management and decision-making.
How much does it cost to file Articles of Incorporation?
The cost varies by state but can range from a small fee to several hundred dollars. Check with your state’s Secretary of State office for the exact amount.
Where do I file Articles of Incorporation?
You file them with your state’s Secretary of State office or a similar state agency responsible for business filings.
How long does it take to get Articles of Incorporation approved?
Approval times can be rather varied depending on the state and method of filing but generally range from a few days to several weeks.
What is the difference between an LLC and Articles of Incorporation?
LLC formation requires filing Articles of Organization. Articles of Incorporation establish a business as a corporation, a different legal entity with its own tax implications.
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Bibliography
Internal Revenue Service. "Forming a Corporation." Accessed March 8, 2024.
Internal Revenue Service. "Forms for Corporations." Accessed March 8, 2024.
