Understanding the Articles of Incorporation

If you decide to establish your business as a corporation, you must file the articles of incorporation to make it official. Also called a certificate of incorporation, this is a legal document that outlines your company’s basic info, such as its name, address, purpose and type of stock.

Here’s what you need to know about how to file your articles of incorporation, plus state-specific regulations.

What are articles of incorporation?

Articles of incorporation, also known as the corporate charter, are a set of official documents filed with your state when forming a corporation. You typically need to pay a fee and provide the following information when submitting your articles of incorporation:

• Name of the corporation: You’ll want to ensure your corporation name doesn’t already exist to avoid your application being rejected. You can search for available business names on your state’s Secretary of State website.
• Business address: You typically need to maintain a physical presence in the state you register your corporation in. However, there are some exceptions to this rule, such as if your company generates a significant portion of its revenue within another state.
• Business purpose: Some states require a statement outlining your company’s purpose. Unless your state requires in-depth detail, you can keep this description basic: “The purpose of this corporation is to engage in any lawful activity permitted in this state.”
• Registered agent: A registered agent is required when forming an LLC, partnership or corporation. The agent acts on behalf of your business, receiving and filing all required legal documents.
• Number of authorized shares: You’re required to disclose how many shares of stock your corporation is allowed to issue. While there’s no set minimum or maximum, your filing fees may increase if you exceed your initial number. You can always authorize more stock later, if necessary. Note that S corporations can only have one type of stock and no more than 100 shareholders, whereas C corporations have no limitations.

What is a registered agent?

A registered agent acts as the corporation’s main point of contact and handles all legal communications and procedures with the state and other entities. The registered agent must live in the state where your business is incorporated.

You can act as your company’s registered agent, or appoint someone else to protect your anonymity. Your registered agent does not need to be directly affiliated with your company. You can also pay a third party to act as a registered agent for your company, such as LegalZoom.

How are articles of incorporation used?

Your company’s articles of incorporation can be used to prove your company was legally established in your state. This set of documents also contains your company’s basic info, which is publicly available for anyone to access. For example, having your corporation’s official name listed on your articles of incorporation and registered with your Secretary of State can prevent someone from taking the same name. You may also need to provide your articles of incorporation if you decide to sell or transfer business ownership.

In addition to sharing info about authorized stocks, your state may require your document to include officer information, such as who will fill the role of president, vice president, treasurer and secretary. Some states may even ask you to outline how your company appoints officers, although these details are typically found in your corporate bylaws.

It’s worth noting that each state will have its own statutory default provisions, which means a standard set of rules of what forms to file, required fees and who to pay. However, you may have the option to override your state’s default guidelines. Start by contacting a compliance expert in your area who understands your state’s specific requirements and can help tweak your document as needed.

How to file articles of incorporation

1. Create your document
   Go to your Secretary of State’s website for state-specific rules and guidelines. Most states will have a form for you to fill out, or you can find a free template online to get started.

   Although you’re not required to use an attorney, having a legal professional review your document can help spot mistakes and ensure you’re following state laws. Seeking professional guidance can also be worth it if your corporation will be issuing various types of stocks or a significant number of shares.

2. Gather required signatures
   All incorporators may need to sign the form, or an attorney could sign in place of an incorporator.

3. Submit the document
   Most states require you to submit your articles of incorporation with your Secretary of State. However, some states may require you to use a different office, such as the Arizona Corporation Commission in Arizona or the Maryland Department of Assessment and Taxation in Maryland.

Some states allow online registrations, while others require you to file in person or through the mail. Certain states, like New York and Massachusetts, allow you to fax your documents.

Filing online is generally the quickest way to become incorporated, if it’s available in your state.

4. Pay the fee

Fees for filing your articles of incorporation vary widely by state. It only costs $45 to file in Arkansas, while incorporators in Texas must pay $300. You may be charged an additional fee when filing an annual report, if your state requires one.

When paying filing fees, make sure to use your business bank account to keep your transactions separate from your personal finances.

Articles of incorporation vs. articles of organization

While articles of incorporation and articles of organization sound like they’re the same thing, they are two entirely different documents.

• Articles of incorporation are used to form a corporation, such as a C, S or B corporation. This document outlines the company’s structure, such as its legal name, address, purpose, officers and number of authorized shares. The articles of incorporation are public documents, available for anyone to see.
• Articles of organization are used exclusively for limited liability companies (LLC). This document acts as more of a personal protection, helping guide how business decisions are made and internal disputes are handled between members.

There are pros and cons to forming a corporation versus an LLC. Picking the right business type depends on your ownership structure, if you want to offer public shares and what tax status best fits your company’s needs.

How to file articles of organization

1. Create your document
   Visit your Secretary of State’s website to get up to speed on local requirements. From there, download a free template online to get started.

You generally need the following info when drafting your articles of organization:

• LLC name and address
• Start date
• Registered agent
• The company’s purpose
• LLC manager and list of members
• Operating agreement, such as a list of rules and regulations.

2. Gather required signatures
   If you run a single-member LLC, meaning you’re the only one listed on the document, then you don’t need to do anything else. Otherwise, all initial members may need to sign the articles of organization to show they’re a critical component in running the business.
3. Submit the document
   Check with your state regarding options for submitting your articles of organization. Some states allow you to submit online, in person, through the mail or by fax. However, some states charge an additional fee for in-person or mailed submissions.
4. Pay the fee
   Similar to filing your articles of incorporation, each state has its own fee for submitting your articles of organization. Arkansas has the lowest price at $45, while Massachussttes charges a $520 filing fee.

The good news is that these filing fees can likely count as a qualified business tax deduction. Check with your tax advisor to see if you qualify and how to claim this expense on your business tax return.

The different types of corporations

You have multiple options for how to incorporate your business. Keep in mind that the business structure you pick affects your tax liability and the number of shareholders you can have.

• Sole proprietor: Even if you’re the only person running a business (also known as a sole proprietorship), you can still become legally incorporated. Doing so will make you the president, director and sole shareholder. After filing your articles of incorporation, you can elect S-corp status to avoid double taxation.

• Limited Liability Corporation (LLC): Your business’s income and expenses pass through to you and any other owners, who must pay personal tax on any profits. You can change your LLC to a corporation, or you can maintain your LLC and elect S-corp status to avoid double taxation. However, LLCs’s can’t have or issue stocks — even with S-corp status.

• S corporation: Income passes through to shareholders and is taxed at the individual income tax rate instead of the corporate rate. S corporations are limited to 100 shareholders and can only have one class of stock.

• C corporation: The business pays corporate income tax and shareholders pay tax on dividends, resulting in double taxation. You can have an unlimited number of shareholders and, like S corps, all owners have limited liability.

• B corporation: As a mission-driven, for-profit corporation, you may need to submit annual benefit reports showing community contributions. The business will be taxed at the corporate rate, and shareholders are responsible for holding the company accountable to contribute to the public good and remain profitable.

You should choose the corporate entity that best fits your business model and growth plans. General tax and shareholder benefits may look good on paper, but you should take the time to determine which structure would most benefit your specific business.

Next steps after filing

After filing your articles of incorporation, you’ll receive a certificate officially recognizing your business as a corporation — but you may have more to do, based on your state’s requirements.

1. Publish a notification of the incorporation

Some states require you to publish a notice once your company is officially incorporated. Currently, this is a requirement for S corporations in Arizona, Georgia, Nebraska and Pennsylvania. C corporations in the above listed states, plus Illinois, must also publish a notice.

2. File a statement of information/annual report

Almost every state requires you file an information report, either on an annual or biennial basis. This statement of information can include your corporation name, address, type of business, registered agent and the names of several officers.

Fees for filing this report will vary by your type of business and your state.

3. Create bylaws

Bylaws serve as the formal guidelines for how your company handles disputes, as well as losses, profits, ownership percentages and even dissolution, if the business were to close. An attorney could draft bylaws for your corporation, or you could search for free templates online.

Although bylaws are not filed with any government agency and are for internal use only, they are critical to keeping your corporation’s operation running smoothly.

4. Get a certificate of good standing

A certificate of good standing verifies your existence and status as a corporation in your state. Some lenders require such a certificate when reviewing your application for business financing.

In Wyoming, business owners can generate a certificate of good standing on the Secretary of State website at no cost. Otherwise, the cost can range from $5 to $50.

5. Record corporate minutes

Corporations are generally required to hold regular board meetings and document critical issues impacting the organization. If you fail to keep up with these meetings, you could jeopardize your company’s corporate liability protection, tax advantages and other benefits.

A company’s recorded minutes can be used to review meeting events like adding or removing a director, or voting for or against certain actions. A person within the organization is typically tasked with keeping track of physical and digital copies of meeting minutes.

6. Prepare for taxes

As a corporation, you’re required to pay the IRS estimated income tax if you expect to owe $500 or more when your business tax return is filed. In addition, if you have full- or part-time W-2 employees, you need to withhold a portion of their paychecks for federal income, Social Security and Medicare tax — with your business covering half of these taxes. Other taxes may include federal unemployment tax (covered 100% by your company) and excise tax for specific goods, services and activities.

Talk to your tax advisor on how to best prepare for navigating business taxes. Using accounting software can help keep your finances organized.

7. Remain compliant

You need to stay on top of filing all necessary information to maintain your corporation certification. Many law firms offer corporate maintenance programs to help business owners comply with annual and seasonal requirements and obligations. Overall, having a lawyer on hand can ensure you don’t miss any essential details. Plus, if your corporation gets sued, using a familiar attorney can help you navigate how to best handle the situation.