Setting up a new company or business involves various steps, and new entrepreneurs should know about them in detail with attention. Articles of incorporation are a set of documents that an organization or business should file with a government institution to lay a legal foundation for the organization. They are compulsory for those who want to start a business. However, knowing what are articles of incorporation are will help new entities to gain more insights and allow them to overcome complications effectively. Furthermore, they provide ways to plan business operations without any hassles.
What are articles of incorporation?
Understanding what articles of incorporation are allows new entities to launch a new business in a location with ease. Articles of incorporation serve as a necessary component in the corporate formation process when a company or business wants to operate in a state. They are public records available to stakeholders and others who want to know essential details of a company or business. These are sets of documents that elaborate on the type and nature of a business and its purpose, with specifications such as name, contact details, etc. A corporation can either prepare the documents by itself or contact a professional.
What are the important things to include in articles of incorporation?
The formalities of articles of incorporation may vary from one state to another in a country that contains the essential information. Therefore, it is essential to know them before starting a company or business.
Here are important things to include in the incorporation process.
1. Corporation name
An entity should select a name for its operations that is different from others. It should check whether the name is already used by someone or not. Moreover, new entities should ensure that they pick a name that is easy to remember for customers.
2. Principal address
A new entity should mention the principal address where someone can contact them for communication purposes. A P.O. box is necessary for small businesses, which is sufficient in some jurisdictions. On the other hand, having a physical address is generally preferred for an entity.
3. Corporation type
Entrepreneurs should define a business type properly that legally specifies a structure. In some demographics, a business requires prefixes such as “Ltd.,” “LLC,” or “Inc.” Many state jurisdictions don’t allow entities to use certain words that are offensive. A business should determine whether it is an S corporation, a C corporation, or a nonprofit corporation.
4. Purpose of a company or business
A company or business should define its purpose clearly and include the highest-level objectives of what it is meant to do. The purpose of most business organizations is to earn a profit for shareholders. However, a nonprofit organization aims to generate social benefit by providing services to society.
5. Capital structure
A company’s articles should include the capital structure while planning operations. If there is one stock, the capital structure should have at least one class of common shares.
6. Corporate governance
Board of directors, officers, shareholders, or members’ rights and obligations come under this category. A new entity should furnish its details during incorporation that outline its duties and responsibilities.
7. Administration of corporate records
New entities should maintain, access, and distribute records to stakeholders and others. They may fall under local business rules, and sometimes articles limit access to financial records if there are no legal and unconditional rights for shareholders.
8. Duration of a corporation
A corporation should state the duration in years that it expects to operate. It is wise for founders to decide the duration correctly, which helps generate a high profit.
9. Registered agent
A new entity should include the name of the registered agent designated to receive service of process or other important activities, including government correspondence, lawsuits, tax filing, etc.
How do you amend or change articles of incorporation?
1. Drafting specific rules of amendment
A new corporation should consider drafting specific rules of amendment and the changes to be made with more care. It should get approval from a corporate officer or director and needs a formal stamp.
2. Obtaining necessary approvals
If a corporation has a board of directors, then it needs the board’s approval to implement the amendment, and some states require shareholder approval.
3. Filing articles of amendment
A corporation should file the articles of amendment with the same state agency after receiving all necessary approvals.
4. Providing appropriate notice
The corporations must publish a notice of changes to their articles of incorporation in some jurisdictions. A classified-type ad in a legal or business publication will fit the bill.
Articles of incorporation example
Below is the articles of incorporation that allow entities to get more ideas.
Article I—Name
The name of the corporation was XYZ Limited.
Article II—Purpose
The purpose of the corporation is to provide legal services or engage in lawful activities.
Article III—Principal Place of Business
The company XYZ Limited should provide the principal place of business in a location
Article IV—Shares Authorized
XYZ Limited is authorized to issue only 10000 shares of “common stock.”
Article V—Board of Directors
As per the corporation’s bylaws, the shareholders of XYZ Limited can elect 2 directors.
Article VI—Registered agent for service of process
XYZ Limited should provide the name and address of the registered agent.
Article VII—Duration of the Corporation
XYZ Limited will have a perpetual existence.
How do you file articles of incorporation?
The incorporator should start by collecting important details, drafting the articles in a sequence, filling out the form, reviewing the information, and signing it. Entities should decide where they want to launch their operations and emphasize the state in which they want to operate.
What is the role of an incorporator?
An incorporator should sign the articles of incorporation after reviewing important details and deliver them to the respective state department with the required fee. They can work closely with an expert attorney or an agency before filing documents.
Conclusion
A new entity should give more priority to knowing the articles of incorporation before planning operations in a state. This will help achieve goals with high success rates.
