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Articles of Incorporation

Articles of Incorporation are documents state which business you will be running, information about your business. The information that you provide in these articles of incorporation are public information, thus anyone who want to access them will be able to get them in public domains.

Different from general partnership or a sole proprietorship that usually formed when you ready to start running a business, an LLC or a corporation must be formed within the state before it can be count as a legal entity. Each state has different requirements for the incorporation of companies.

Features of Articles of Incorporation

Corporate Name

Firstly, you need to decide on the name of your company since it will be used to trade in the market. It will be your identifier, follow that will be an unique identifier such as Company, Corporation or Incorporated, which can be shorted as abbreviations Co., Corp., Inc.

It is recommended to run a name availability search to know whether your company name is taken or not. Whichever the name you decided to use, it is up to the state where you seek incorporation to verify and decide whether that name is used or similar to the one that is in use. Thus, the state has the right of approval.

Purpose of your business

In this section, you will highlight the purpose of your business, why you want to do it and what do you see in the future of your business. There are two options under this clause: general or specific.

If it is a general clause, your business is being forced to take part in any legally acceptable business. If it is a specific clause, you will be limited with your business in providing a careful and elaborate explanation of the services or business that you will involve in, and you will also be limited to the provision of the aforementioned only.

A registered agent

Each state required your business to have a registered agent at the time of incorporation. The job of this agent is to receive any important documents, especially legal and tax documents for your business. This agent must have a physical address, can be contact during normal work hours and P.O. Boxes are not allowed.

In order to make sure all their documents are received on time and properly handled, many businesses decide to use a registered agent service provider rather than create their own. It’s easier, more convenient and those agents will also provide a host of other compliance services.

An incorporator

This is a person or the company that responsible for filling the Certificate of Incorporation with the respective state where you decide to set your business. You will need their address, signature and name. If you decide to fill your application online, the incorporator must be a representative of the service provider guiding you through the process.

Share capital

In the process of filling the application, you must indicate the number of shares you are authorizing. The size of the corporation is not important, you must always have stock because it represents the ownership of the company.

You don’t have to indicate the total number of shares authorized since your company can hold shares that are not issued, to issue them later or to raise the ownership of any of the shareholders in the future.

When you decide to declare a large amount of share capital, some states will charge franchise taxes depend on the number of outstanding shares your company owns, so think carefully before making any decision.

Share Value

The face value of the shares of a company is the minimum stated value. Normally, this value is nowhere close to the actual value of the shares of your company. The actual value of your company’s shares are the market values or the value that investors would pay to own them. For a public company, this would be determined by the price that stockholders would be happy paying for each share at the exchange. For a private company, it is determined by the book value or the overall value of the company.

Directors

In many states, it is required to put the names and physical addresses of the directors in the documents of incorporation. These individuals are responsible for overseeing the affairs of the company and making all the important management and business decisions.

Company officers

The officers of the company also must be included in the articles of incorporation. These officers include: secretary, the vice president, the president…

Company address

It is necessary to mention the company’s legal address, this is optional in some states but important nonetheless.

Procedure for obtaining articles of incorporation

Initial contact

Firstly, you will need to contact the secretary of state in your jurisdiction. The contact details should be list on their website, you can also visit their offices in person if you can’t connect with them online.

Name search

You must conduct a name search on the secretary of state’s website. It is a quick but critical process. It’s impossible for you to have your company signed under a name that already in use by another company. This process will keep you safe from infringement lawsuits from other companies.

Fill forms

When you receive the forms, fill them completely and be sure all the information you put in are credible, accurate and verifiable. If you struggle with this process, you can consult any lawyers or agents to do this for you, but with a price range from $100 to $1500. When you finished, submit the files either online or through registered mail to the secretary of state.

Fees

You also need to pay any fees applicable before incorporation. Each state has different price range from $35 to $200, pay these fees and you should be good to go.

Approval

The last part is to wait for the approval from the secretary of state, assenting to your articles of incorporation and thus making your company a legally incorporated company, approve the rights to operate in the state under the incorporated name.

After that you can create corporate booklets with the articles of incorporation that have been approved, the board members of your company, the shareholders and bylaws under which you will be in operation.

Importance of articles of incorporation

Perpetual existence

An incorporated business is everlasting, this is one of the perks that you will appreciate about incorporation. It means that the company won’t be affect by the dismissal, death or withdrawal of any owners. The offices will hold more weight than the office holders – who are replaceable.

Limited liability clause

One of the most important reasons to incorporate your business is to keep the operations of your business and your personal business safe from sudden unforeseen liabilities. An incorporated business is a separate legal entity, meaning that your creditors can only deal with the company and not the personal assets. All your personal assets won’t come under threat if the company is facing liquidation or lawsuits from others.

Tax benefits

An incorporated business usually gains benefits from tax deductions from several operational costs. This will cut down your corporate tax liability significantly, those tax liabilities may be the cost of employee wages, production cost, materials cost, insurance and retirement cost, entertainment expenses, business travel arrangements…

Improve the image of your company

By incorporate your company, your company’s public image will improve immensely and adds credibility to your operation. With the addition of terms such as Inc. and LLC, your company will look more professional and trustworthy. Also, banks and investors will find it easier to do business with your company if you ever in a bad financial position.

Attract quality management

A centralized management system usually used in an incorporated company and the shareholders like to vest in the authority of the Board. It is the Board decisions to delegate duties to different management officers in the company.

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