Last Updated on July 26, 2020
In order to form a corporation, you will first need to file articles of incorporation. The articles of incorporation is the legal document used to create the legal entity with the Secretary of State. This document is also referred to as a “corporate charter” in some states. The articles of incorporation contain general information about the company and are filed with the state government agency responsible for business entities in each state. Your corporation is effectively open upon the filing and acceptance of the articles of incorporation.
Every state has different requirements but the articles generally will include the legal name of the company, the purpose, and other basic information. When the articles of incorporation are filed and accepted, the corporation has been officially formed. Until this occurs, you cannot publicly describe your business as a corporation or denote your company name with “Inc.” or “Corp.”.
Where Are the Articles of Incorporation Filed?
Most states accept business filings through the secretary of state’s office, but some states have a different agency responsible for business organizations. Business owners need to choose their state of incorporation carefully. States like Delaware and Nevada are known to have attractive corporate regulations. However, unless you have headquarters or a principal place of business in one of those states, you are typically better off incorporating where you plan to conduct your business.
When filing the articles of incorporation with your state’s agency, you must form under state laws and pay the required state filing fees. Upon approval of the filing, your company is officially open under the laws of the state. After acceptance, most states will issue a certificate of incorporation to the incorporator by mail.
What Information is Included in the Articles of Incorporation?
The articles of incorporation include basic information about the corporation name, corporation’s purpose, name and address of the incorporator, and the name and street address (PO Boxes aren’t allowed) of the registered agent.
Most states also require other information such as:
- The corporation’s physical address for its principal place of business;
- The specific purpose of the corporation. The specificity of this description will depend on your state’s rules;
- Names and addresses of the officers and directors;
- Information about the shares of the corporation such as class of stock (common stock or preferred stock), number of shares, dollar amount, etc.
- The duration of the corporation. This can be a definite period of time or it can exist in perpetuity;
- Some states may require that the articles of incorporation list the initial board of directors;
- The effective date will need to be stated in the articles as well. This can be the date when filed or a specified time in the future.
- Duration of the corporation’s existence if you want the corporation to automatically close on a certain date in the future (not common)
In most states, the information provided in the Articles of Incorporation will be public record, meaning anyone can look up this information. In some cases, hiring a registered agent service can help keep some of this information private
The articles of incorporation will need to be signed by an “incorporator” before submitting it to the state. An incorporator can be an individual or another corporation and does not need to be a shareholder or director.
Are the Articles of Incorporation the Same as Bylaws?
Usually, states require that corporations also establish bylaws. Bylaws are an internal document that describes the guidelines for corporate operations as well as the rights and responsibilities of the company’s officers, directors, and shareholders. Unlike the articles of incorporation, bylaws are not typically filed with the state. The articles of incorporation are relatively short (approximately 1-5 pages in length), but corporate bylaws can be quite lengthy (usually over 10 pages in length).
What is the difference between a C-corporation and S-corporation?
The difference between a C-corporation and S-corporation is the way the entity is taxed.
The C-corporation is the default filing for corporations and will see the profits taxed at the corporate level and the shareholders are taxed and dividends that are distributed.
The S-corporation, which is a tax election under the Internal Revenue Code and passes the tax liability from the corporation to the shareholders. This election can be enacted by filing Form 2553 with the Internal Revenue Service (IRS),
The s-corp tax election is beneficial for most small businesses, however, you will want to talk with an accountant to run the numbers.
How long does it take to file the Articles of Incorporation?
Each state varies, however, most take around 2-4 weeks. Many states also offer expedited processing to reduce that to one to two business days.
What is the difference between the Articles of Incorporation and Articles of Organization?
The Articles of Organization are used to create corporations while Articles of Organization (sometimes referred to as Articles of Formation, Certificate of Formation, etc) are used to create a Limited Liability Company (LLC).