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What Every Business Owner Needs to Know about Articles of Incorporation
For many entrepreneurs, developing a new small business can sometimes feel like a daunting task. And the many legal requirements involved can make some entrepreneurs feel overwhelmed and apprehensive.
However, the best way to tackle these types of responsibilities is to educate yourself on what legal documents need to be completed and by when.
For business owners, one of the most important steps of incorporating a new business entity is when you file articles of incorporation. Below, we outline everything you need to know about this legal requirement:
Function of Articles of Incorporation: Sometimes called the corporate charter, articles of association, or certificate of incorporation, the articles of incorporation are a set of documents that legally record the creation of a corporation. This legal document comprises information about the corporation, including the business name and business address.
While corporate bylaws outline the rules and regulations governing a corporation—as well as establish the roles of the company’s directors and officers—the articles of incorporation develop the legal pillars of the business.
Filing articles of incorporation is legally required for business owners who plan to structure a new or established company as a professional corporation, nonprofit corporation, or other classification.
Articles of incorporation create a separate legal entity for the business and split the business owner from the business. By choosing to incorporate your business, you as the owner reduce your personal risk, since the business becomes financially responsible for any debts and legal responsibilities.
Because each state has different fees, paperwork, and regulations for filing articles of incorporation, it is important to check with your secretary of state. While the articles of incorporation vary by state, most states request the following basic information:
–Name of the corporation/business
–Name and address of the corporation’s registered agent
–Type of corporate structure
–Names and addresses of the company’s board of directors
–Type of authorized shares of stock (common stock and preferred stock) available to the company
–Number of shares of stock (common stock and preferred stock) available to the company
–Duration of the corporation/business (if temporary)
Importance of Articles of Incorporation: Articles of incorporation are crucial because they establish a company within its home state. The purpose of filing is to notify the state about the corporation’s purpose, the name and address of the registered agent, information about the company stock and shares, and the names of any incorporators.
After a company’s business status is recognized, some business owners will modify their articles of incorporation. This is done with a restatement, or restated articles of incorporation.
Articles of Incorporation Only Apply to American Corporations: Articles of incorporation do not apply to foreign corporations. Instead, a foreign corporation operating in this country must file a certificate of registration.
Articles of Incorporation are related to Articles of Organization: Articles of organization and articles of incorporation are similar filings—except the articles of incorporation are designed for companies developing a corporation, and the articles of organization are for limited liability companies (LLCs).
Completing the Required Legal Paperwork: Before filing the articles of incorporation, business owners must structure the business as a corporation. These documents vary by state, so be sure to check with your secretary of state.
Once you have completed the required documents, you can submit them by mail or in person at the department of state’s office. Additionally, most states allow you to electronically submit forms to the secretary or department of state’s website. While the filing fee tends to vary by state, the cost is typically between $50 and $300.
After receiving the forms, the secretary of state’s office will review them to ensure the business name is not already in use and that your company’s information meets all of the state laws. Once this step is complete, the state will file the forms and make your business a legal corporation.
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