In order to incorporate your business, you must file a formation document with the state government. This document is commonly called Articles of Incorporation, although in some states it may have a different name like a Certificate of Incorporation or a Certificate of Formation. It’s also commonly referred to as a corporation’s “charter”. Unlike a sole proprietorship or general partnership, both of which are formed as soon as the owner or owners conduct business, a corporation must be created with the state, and each state has its own incorporation requirements. This article looks at what the states require when it comes to the Articles of Incorporation.
Understanding the role of Articles of Incorporation
The Articles of Incorporation is the document that creates a corporation. It provides the state of incorporation with certain basic information about the corporation that the state wants to know. These are the required provisions of the Articles. However, the Articles can also have what are called optional provisions. These provisions give the corporation’s owners the chance to include information that they want the public to know. It also gives them a chance to opt out of certain default provisions found in the state’s law. For example, by default, a corporation’s existence is perpetual. But if the owners want to limit its existence, they can do that through a provision in the Articles.
What has to be included in Articles of Incorporation
While the required information varies by state, there are four pieces of information that are generally required to be included in the Articles of Incorporation regardless of the state. They are as follows:
- Corporate name. Your corporation’s desired name must be included, typically with a corporate identifier, such as "Corporation," "Incorporated," "Company," or an abbreviation, such as "Inc." You may want to conduct a preliminary name availability search before submitting the Articles of Incorporation. If you incorporate online, the incorporation service you use will typically include this. Remember that the states will generally reject Articles of Incorporation with a name that is already in their records as belonging to another corporation or other entity, or, in some states, that is considered "deceptively similar" to another entity’s name.
- Name and address of registered agent. Virtually all states require corporations to have a registered agent in the state of incorporation. The registered agent receives important legal documents and official government communications on behalf of the corporation. The registered agent’s address is commonly called the registered office. The registered office must be a physical location (no P.O. Boxes) in the state of incorporation and the registered agent must be available to be served there during normal business hours. Many business owners use a registered agent service provider to ensure important documents are professionally and discreetly handled.
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Number of authorized shares of stock. Corporations must outline the number of shares of stock they wish to authorize. All corporations (no matter how small) have stock which represents ownership. As you consider how many shares to authorize, remember that a corporation does not need to issue the total number of authorized shares. Some hold unissued shares to add owners later or increase the ownership percentage for a current shareholder. Some states determine franchise taxes based on shares outstanding so consider this before issuing large amounts of stock.
If the corporation is going to have more than one class of shares, say a class of common shares and a class of preferred shares, a distinguishing designation for each class and a description of the rights and privileges of each class will have to be included. Preferred shares typically give shareholders preferential payments of dividends or distribution of assets, if the company dissolves. Many small business owners only authorize shares of common stock. For more details on handling shares, it’s wise to talk with an attorney. - Incorporator. This is the person or company who executes the Articles of Incorporation and delivers them for filing with the state. Most states require the incorporator’s name, signature and address to be included. If you incorporate online, the incorporator will be a representative of the incorporation service provider. If initial directors are named in the Articles of Incorporation, the incorporators’ powers end when the Articles are filed. If the initial directors are not named, the incorporators must elect the directors. The powers and responsibilities of the incorporators would then end.
Other provisions that may be included in Articles of Incorporation
There are certain other provisions that some states require, while other states make them optional. Common ones include the following:
- Business purpose. This explains what your company is incorporated to do or provide. There are two types of business purpose clauses: general and specific. Some states accept a general-purpose clause, indicating that the company is formed to engage in “all lawful business”. Other states require a more complete explanation of the products and/or services your company will provide.
- Share par value. The par value of a share is its minimum stated value. Most corporations set the par value very low, like $0.01 or lower, or opt for no par value shares if the state allows it. (If your state asks for the par value of shares and you aren’t sure what to do, you may want to talk to an attorney, as par value can affect franchise tax and legal capital). Par value should not be confused with actual value, which does not have to be outlined in the Articles. The actual value of a share is its fair market value, or what someone is willing to pay for it. For public companies, actual value is determined by the price that investors are willing to pay for each share on a national exchange. For private companies, the actual value is typically determined by the overall corporation value or book value.
- Initial Directors. If initial directors are named in the Articles of Incorporation, they will complete the corporation’s organization, (e.g., approving the bylaws, electing officers, authorizing the issuance of shares, opening corporate bank accounts, setting the fiscal year, etc.) They serve until the first meeting of shareholders or their successors are elected.
- Initial Officers. Officers—such as president, vice president, secretary and treasurer—are responsible for the corporation’s day-to-day activities. While inclusion of initial officer information is optional in many states, some may require it.
Principal office of the corporation. Supplying the principal office address is optional in some states and required in others. This is an address where the corporation will principally be conducting its business.
Articles of Incorporation FAQs
What if my corporation will be an S corporation?
If you decide you want your corporation to be an S corporation – meaning the corporation will not pay a corporate income tax and its income will pass through to the shareholders, that is not an election you make in your Articles of Incorporation. It’s a federal tax law matter, not a state corporation law matter. You make the election to have your corporation taxed as an S Corporation by making a filing with the Internal Revenue Service, after your corporation has already been formed with the state.
Who files Articles of Incorporation?
The Articles of Incorporation are filed by the incorporator. They are filed with the state of incorporation’s business entity filing office, which is called the Secretary of State in many states. The acceptable methods of delivery can vary by state and can include regular mail, couriers, fax, email, or hand delivery. However, some states have online filing only.
How much does it cost to file Articles of Incorporation?
The filing fees can vary greatly depending on the state.
When does the corporation’s existence begin?
The corporation’s existence begins upon the filing of the Articles of Incorporation unless a delayed effective date is permitted by the state and set forth in the Articles. A delayed effective date is useful if you want your corporation’s existence to begin on a specific date.
What evidence of filing will I get?
It depends on the state. For example, the state may return a certificate of incorporation, or it may return a copy of the Articles of Incorporation stamped “Filed”, with the date of filing.
What’s the difference between Articles of Incorporation and corporate bylaws?
The bylaws are the regulations of a corporation. They contain the basic rules for the conduct of the corporation’s business and affairs. The bylaws generally cover the areas of the corporation’s internal management. Typical bylaw provisions may concern the location of offices, the date and place of shareholders’ and directors’ meetings, quorum requirements, the voting entitlement of shares, the powers, duties, and qualifications of directors and officers, etc. The bylaws are a private document. They are not filed with the state like the Articles of Incorporation.
To learn more about your state's incorporation requirements, visit our Corporation Formation Requirements pages in our state guides.
