Articles of Incorporation
To create a corporation, a document must be filed with the state agency that keeps corporate records, which in most states is the Secretary of State. In most states, this document is called the Articles of Incorporation. However, in some states, it may be called the Certificate of Incorporation or certification of formation. This document is referred to as the Articles of Incorporation throughout this guide. Some corporations have long, elaborate Articles that describe numerous powers and functions, but most of this is unnecessary. The powers of corporations are explained in state law and do not have to be repeated. Short Articles are just as legal and allow more flexibility.
Typically, state law requires only a minimum amount of detail be included in the Articles of Incorporation. Some things, such as the purpose of the corporation, regulations for the operation of the corporation, and a par value of the stock, may be explained in the Articles of Incorporation. This is not advisable unless required, since any changes would necessitate the complicated process of amending the Articles. It is usually better to explain these terms in the bylaws. The matters typically required to be contained in the Articles and a few of the optional provisions follow.
Name of the Corporation
Most states require that the corporation name contain one of the following six words:
The reason for the requirement is so that persons dealing with the business will be on notice that it is a corporation. This is important in protecting the shareholders from liability.
Address of the Corporation
In most states the street address of the principal office and the mailing address of the corporation must be provided.
Number of Shares
The number of shares the corporation can issue is usually an even number, such as 100, 1,000, or 1,000,000. In some cases it may be advantageous to issue different classes of stock-such as common and preferred, or voting and nonvoting-but such matters should be discussed with an attorney or accountant.
If there are different classes of stock, then the Articles of Incorporation must contain a designation of the classes and a statement of the preferences, limitations, and relative rights of each class. In addition, if there are to be any preferred or special shares issued in series, then the Articles must explain the relative rights and preferences, and any authority of the board of directors to establish preferences.
This guide explains how to form a corporation with one class of stock. It is usually advisable to authorize double or quadruple the amount of stock that will be initially issued. The unissued stock can be issued later if more capital is contributed by a shareholder or by a new member of the business.
One important point to keep in mind when issuing stock relates to par value. Par value is not the actual value of the stock because a corporation's net worth may play a role. When issuing stock, the full par value must be paid for in shares. If this is not done, then the shareholder can later be held liable for the full par value.
Registered Agent Information
Each corporation must have a registered agent and a registered office. The registered office can be the business office of the corporation if the registered agent works out of that office, it can be the office of another individual who is the registered agent (such as an attorney), or it may be a corporate registered agent's office.
Name and Address of the Incorporator of the Corporation
This may be any person, even if that person has no future interest in the corporation. Other companies can also serve as the incorporator.
In most states, the duration of the corporation need not be mentioned if it is to be perpetual. If not, the duration must be specified in the Articles.
A specific effective date may be in the Articles, but is not required. Articles are effective upon filing. If an effective date is specified, state law varies as to the time before or after the filing in which the Articles of Incorporation are effective.
The Articles of Incorporation must be signed by the incorporator and dated. The registered agent may be required to sign a statement accepting his or her duties as such. This is sometimes done as a separate form or sometimes on the same form as the Articles.
The Articles of Incorporation need not be on any certain form. They can be typed on blank paper or can be on a fill-in-the-blank form. Some states have their own incorporation forms, which you can get by mail or over the Internet.
The Articles of Incorporation must be filed with the Secretary of State, along with the filing fees. If you wish to receive a certified copy of the Articles, the cost is additional.
In most states, the return time for the Articles varies by state. You can call the Secretary of State for details.