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Articles of Incorporation, Explained
What they are, why you need them, how to file them and more…
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So you’re starting a business or perhaps that side gig you’ve been doing is starting to take off. Is it time to incorporate yet? Incorporating your business is a big decision, in part because the legal loopholes and technicalities you have to jump through can be confusing.
One of the first and most important of these technicalities is known as the “articles of incorporation.” Continue reading to find out what they are, why they’re important and how to file them.
Definition of Articles of Incorporation
The articles of incorporation, also sometimes referred to as a certification of formation or a “charter,” is a set of publicly-disclosed business documents that aims to establish your corporation as a separate and individual business entity. It contains general information about your corporation, such as the business’s name and location.
The articles of incorporation should NOT be confused with your corporate bylaws, which deal with your internal structure. Bylaws help establish the rules and guidelines that govern your business and lay out the roles and responsibilities of the board and shareholders. The bylaws are not formally filed with the articles of incorporation, but many states do require them as a precondition to incorporation.
Together, your company’s bylaws and articles of incorporation make up the legal framework of your business.
What to Include in Your Articles of Incorporation
The articles of incorporation offer benefits to the individual owner of the company, while increasing transparency to the general public. Let’s take a look at what information you can expect to share so that you can prepare your documents.
In most cases, you will need to disclose the following information:
- Your business name and address
- The name and address of your registered agent. This person is the point person for service of process — or, in layman’s terms, the person someone will serve papers to if they wish to sue you.
- A statement of corporate purpose must be included with your articles of incorporation. It’s strongly advised that you paint with as broad a brush as possible here. Some states will even allow you to state your purpose as engaging in any lawful activity.
Others will want something a little more specific, but the point is your business purpose will likely evolve in the future and you don’t want a legal document limiting this progress.
- The duration of the corporation should also be included. Most states allow you to put “perpetually” as the answer, since the goal of most businesses is, naturally, to continue thriving for as long as possible.
- Your corporate structure must also be clearly stated. Are you non-profit or for-profit? Are you issuing stock or not?
- Any authorized shares should be included in the articles of incorporation. Presuming you are issuing stock, what class of stock is it and how many shares are you making available to the general public?
- Include the names and addresses of your incorporators. The signature of at least one incorporator will be required.
Last but not least, you’ll also need to pay a filing fee, which varies by state. Generally, this fee will range between $50 and $300.
Why File Articles of Incorporation?
Considering the extra hassle and cost of filing articles of incorporation, you may be asking: Do I really need to incorporate?
Fair question.
Filing as a corporation is a good idea for any business that has grown beyond the founding owner, and even for some sole proprietors.
The principal benefit of incorporation is that it separates the assets of the business from the assets of the owner. If you’re a sole proprietor and you get sued, you could lose everything. When you incorporate, your personal assets gain legal protection.
If you have to file for bankruptcy, creditors can only come after the assets of the business, not those of the owner. There is also considerable tax flexibility that businesses that have filed articles of incorporation benefit from. Expenses can be deducted before salaries are ever paid out. The salary of the owner is no longer directly connected to the profit margin of the business.
There’s also a marketing component to incorporation. Putting “Inc.” after your name can help your business gain legitimacy in the eyes of vendors and potential clients. Furthermore, your corporate name is protected by the state, which is a great boost for your efforts at branding.
How to File Articles of Incorporation
Every state has a different form for filing your articles of incorporation. We’ve compiled links to each state’s form to make it easier for you to find, print out and fill out your state’s proper paperwork. Once completed, send the form (via mail) to your state’s Secretary of State office.
Note: There are many different types of corporate forms provided by each state. Finding the right articles of incorporation form you need to submit will depend on which type of business entity you’re trying to establish. Be sure to carefully read the information provided on your state’s business formation page to determine which form you need to download and complete.
MaxFilings: We Make Online Business Incorporation a Breeze
A business owner who has to hire even one person is exposing themselves to liability. They are now responsible for the actions of their employees. When a side business venture gets busy enough to add personnel, it’s probably time to incorporate by filing your articles of incorporation.
Even if you’re a one-person shop, there may be scenarios where incorporation is a good idea. For instance, if you fix bikes and an injury happens after a repair job, you could face a lawsuit. Or if you’ve started your own veterinary practice on the side, you could face liability issues.
Filing your articles of Incorporation can be a tedious process, but it’s well worth it for the overwhelming majority of business ventures. At MaxFilings, we can help you incorporate online quickly, easily and reliably. Get a free quote today.
