What are Articles of Incorporation?
Articles of Incorporation, also known as a Certificate of Incorporation or Corporate Charter, are a set of formal documents filed with a government body to legally establish a corporation. It generally provides pertinent details such as the company’s name, place of office, and the type and amount of stock to be issued.
Once the Articles of Incorporation are approved by the state, the company becomes a legal entity and can begin conducting business as a corporation. The filing of such articles is often the first formal step in the process of creating a corporation law in many jurisdictions.
What is in the Articles of Incorporation?
The content of Articles of Incorporation can vary by jurisdiction but generally contain key foundational information such as:
- Corporate name — Official name of the corporation. It must be unique within the state and often include a designation like “Inc.” or “Corp.” to indicate its corporate status.
- Purpose of the corporation — This may be a broad statement (e.g. to engage in any lawful business) for some, while other jurisdictions may require a more specific description of company activities.
- Registered agent — The entity or individual responsible for receiving legal documents on behalf of the corporation.
- Principal office address — The physical location where the corporation’s records are kept and when the management functions are performed.
- Incorporators — These are the individuals responsible for forming the corporation, or those who signed and filed the Articles of Incorporation with the state.
- Stock information — If the corporation will issue stock, the articles should outline the number of authorized shares, types or classes of shares (common or preferred stock), and the par value (if any) of such shares.
- Directors and officers — Some states require the articles to list the initial directors or officers who will manage the corporation, including their names, addresses, and roles.
- Duration of the corporation — In most cases, corporations are formed to exist indefinitely, but the articles may specify a limited duration, after which it will dissolve.
Why are Articles of Incorporation important?
Articles of Incorporation are important because they legally establish a corporation as a separate entity, providing limited liability protection for its owners. Filing of these articles ensures compliance with state laws preventing legal penalties and enables capital raising through stock.
What are Articles of Incorporation for an LLC?
For a Limited Liability Company (LLC), the equivalent document is referred to as Articles of Organization, rather than Articles of Incorporation. While they share similar purposes—establishing the company’s legal existence—there are key differences in how they function for an LLC.
Articles of Incorporation vs Articles of Organization
- Articles of Incorporation
- Used for corporations
- Includes details on issuing stock, board governance, and corporate officers.
- Taxed separately from its owners, meaning it may face double taxation (corporate tax and tax on dividends)
- Articles of Organization
- Used for Limited Liability Companies (LLCs)
- Focuses on the structure of the LLC and how it will be managed.
- LLCs offer pass-through taxation, meaning the business itself does not pay taxes, and profits are reported on the owner’s personal tax returns.