Definition: A company’s articles of incorporation are a legal document that establishes a corporation and provides crucial information to the government that allows it to run a business.
What are Articles of Incorporation
The articles of incorporation must be filed to the appropriate government agency when creating a new corporation. In the articles of incorporation, you supply relevant information about the firm. This information includes the company’s name, address, the reason for formation, and the name and address of the registered agent. The registered agent is the first point of contact for any issues concerning the company. When a corporation delivers the document, it becomes a legal entity, and everything in the articles becomes public. You may also be needed to file corporate articles of incorporation, which define how your firm will operate in your state.
What is the purpose of the articles of incorporation?
A corporation is a sort of company organization that legally separates an economic entity from its owners. A corporation is a legal entity with the same rights as people. Corporations can borrow money, enter into contracts, and run business. Because of the legal distinction between the legal entity and the owners, the owners are normally not liable for the corporation’s conduct. If someone sues a corporation, they are not suing the individual shareholders.
When a company decides to register (and thereby become a corporation), it must take specific steps. The filing of articles of incorporation in the state where they manage business is one of these operations.
The articles of incorporation notify the government and the general public about the firm. The articles of incorporation are critical since the firm is not formally a corporation until they are registered. Without these articles, the firm does not have the rights and protections that companies have. Among these protections is a legal separation between the corporation and its owners.
Assume a consumer files a lawsuit against a corporation. When a firm is incorporated, the owners and workers are typically not held liable for the lawsuits. However, if they have not filed their articles of incorporation, the business owners may be held liable.
What is included in the articles of incorporation?
Although the rules for what to include in your articles of incorporation vary significantly by state, there is certain essential information that most states require.
The corporation’s name
Because a company is a legal entity independent of its owners, it should have a distinct name. When selecting a name for your firm, be certain that no one else has picked this company name in your state, and that there are no trademarks on this name. If you select a name whose trademark is currently registered by somebody else, you may face future lawsuits. Furthermore, if you pick a name that is already in use in your state, the government may reject the foundation’s agreement. To signify the status of a company, most corporate names must include “Inc.”
The name and address of the corporation’s registered agent
The primary point of contact for the corporation is the registered agent. If someone has to transmit papers to a corporation, such as for a lawsuit, they would do this through a registered agent. A registered agent might be a company’s owner or employee, or it can be an individual, such as a lawyer employed by a business.
The corporation’s mission
In many states, the mission of the company must be mentioned in the articles of incorporation. Typically, the mission is not particularly specific. Apple’s articles of incorporation, for example, state that the company’s purpose is “to participate in any lawful action or activity for which a corporation may be organized under the General Corporations Act of California, with the exception of banking, trust company business or practice. a profession authorized for inclusion in the California Corporate Code.”
The Board of Directors’ name and address
If you are forming a corporation, you need also form a board of directors. The names and addresses of these directors must then be specified in the articles of incorporation.
The duration of a corporation’s existence
The length of a corporation’s existence is the period of time it will be operational. A company might exist for a limited time or indefinitely. Most companies have an infinite lifetime, which means they will continue constantly.
Type of corporate structure
There are several forms of companies. An organization, for example, can apply as a for-profit company or as a non-profit corporation.
Corporations have shares, which is one of the most significant distinctions between them and other sorts of businesses. One of the things an organization must declare when registering its articles of incorporation is the number of shares it will issue. They can also indicate the rights and advantages of the owner of the share of shares. A company may also incorporate limits on share transfers, such as a declaration that no shares may be transferred without the permission of the board of directors.
The founder’s name, address, and signature
The individual who registers the articles of incorporation is known as the founder. This person might be the company’s owner, although it is not required. There might possibly be multiple founders. The founder must submit his name and address and sign the founding agreement.
Shareholders’ preferred rights
A corporation’s articles of incorporation may include pre-emptive rights. These pre-emptive rights ensure that if the firm issues additional shares, present owners will have first dibs on them based on their current portion of authorized capital. Shareholders may decline this privilege, allowing others to purchase their shares.
The process of changing or repealing the articles of incorporation
When an organization registers its articles of incorporation, it must also create its own corporate articles of incorporation. In the articles, the company can indicate the steps they must take to change or cancel their articles of association.
The financial year of the corporation
The fiscal year is not necessarily the same as the calendar year. Some businesses may pick another 12-month fiscal year rather than operating from January 1 to December 31.
Limitations on liability and compensation for executives, directors, employees, and agents
Damages and limitation of responsibility are two portions of the articles of incorporation that indicate who will not be held liable for the corporation’s and its opponents’ conduct. The primary objective of these elements is to pay for certain people’ damages (that is, to safeguard against responsibility). These components shield owners and workers against litigation caused by the company’s or their own behaviors while on the job.
How to file articles of incorporation?
Consult the government of your state to file the articles of incorporation. This is common at the Secretary of State’s office. Most states provide templates for articles of incorporation, so you don’t have to start from zero. Instead, simply fill in the gaps in the template. Some states may refer to these items as corporation statutes instead.
You will almost certainly have to pay a registration fee when you register the articles of incorporation. According to your state, you may also require corporate articles of incorporation, which explain the individual parties’ roles and describe how your business will be governed. It is not always necessary to submit these articles of incorporation to the state. All you need is to have them in.
Does the LLC have articles of incorporation?
A limited liability company (LLC), like a corporation, is a corporate structure that allows the proprietor to legally separate from his firm. This separation allows them to minimize their own liability.
LLCs differ from corporations in several respects, including ownership structure. The corporation owns stock in the firm. By purchasing stock in the firm, someone gains ownership. So, if you acquire Apple stock, you become a co-owner of Apple.
Instead of having multiple shareholders, an LLC has only one owner (or several owners if the LLC is a partnership).
Because corporations and LLCs are structured differently, they must submit different documentation for formal business registration.