What Are Articles of Incorporation?

Starting a business can be incredibly exciting when you have a great idea and the passion to see it through. However, it can also be confusing and daunting, especially when you encounter jargon and the legal hurdles necessary to start a business. If you’re interested in starting a corporation, one of the most important hurdles is your articles of incorporation.

Here, we explain what articles of incorporation are and why they’re so important if you want to start a corporation.

What Are Articles of Incorporation?

Articles of incorporation are the documents you must file with a state agency — typically the Secretary of State — to legally register a corporation. You do not need to file them if your business is operating and filing taxes as a sole proprietorship, partnership, or LLC. While there are advantages and disadvantages to each business entity, you may only receive the benefits of S Corp or C Corp status by filing articles of incorporation.

The content of Articles of Incorporation can vary slightly from state to state, but generally, they include fundamental information about your future corporation, including:

• Corporate Name: The official name of your business must be unique compared to other businesses already registered in your state. You should conduct a name availability search before filing to ensure your chosen name is not already in use.
• Purpose of the Corporation: This could be a very broad statement about your proposed business, but some states and industries may require more specific and detailed descriptions of your business’s primary activities.
• Registered Agent Information: Every corporation must have a registered agent – a designated individual or entity with a physical address in the state where the corporation is formed. This agent is responsible for receiving legal documents and managing the corporation’s official correspondence with the government. It’s often a business attorney or the primary founder.
• Name and Address of Incorporator(s): The incorporator(s) are the person or people who sign and file the articles of incorporation. They don’t necessarily have to be future owners or officers of the corporation, but they are responsible for the initial filing. Again, this could be the business’s attorney.
• Street Address of the Principal Office: This is the primary physical location of your corporation.

What Are the Benefits of Articles of Incorporation?

When you file articles of incorporation, your business will gain legal status as a corporation. This may come with several advantages, including:

• Limited Liability Protection: One of the chief advantages of becoming a corporation is that it makes your business a separate legal entity from your personal finances. As such, your personal assets, like your house and savings, are protected from business debts and liabilities. If your corporation faces a lawsuit or goes into debt, your personal assets are generally protected from seizure. If you’re a sole proprietor or partner, this may not be the case.
• Greater Credibility: Forming a corporation signals to customers, suppliers, investors, and lenders that you are serious and committed to long-term operations. This can open doors to better contracts, financing opportunities, and a more favorable perception in the marketplace.
• Easier Access to Capital: Speaking of being taken seriously. Corporations may be more attractive to investors and look more reliable to lenders.
• Perpetual Existence: Unlike a sole proprietorship or partnership that might dissolve upon the death or departure of an owner, a corporation generally has perpetual existence. This means the business can continue to operate regardless of changes in ownership or management.

Potential Tax Advantages: Corporations often have tax advantages that are not available to other business entities. While you should always consult with a tax professional to understand your business’s tax liability, filing articles of corporation could put you in position to earn tax credits or deductions.

How to File Articles of Incorporation

While the exact steps vary by state, the general process for filing articles of incorporation usually looks like this:

1. Choose Your State of Incorporation: Most businesses incorporate in the state where they will primarily conduct business. However, some businesses might choose to incorporate in another state. Nevada and Delaware attract about half of all articles of incorporation filings due to their business-friendly regulatory environments.
2. Select a Corporate Name: Search your state’s business name database to ensure your desired name is unique and available.
3. Appoint a Registered Agent: Identify a reliable registered agent who can receive legal and official documents on behalf of your corporation. Many law offices and third-party companies offer registered agent services if you don’t want to use your personal address.
4. Draft the Articles of Incorporation: You can find templates or forms on your state’s Secretary of State website. Many business owners entrust this task to a business attorney.
5. File the Articles: Submit the completed Articles of Incorporation, along with the required filing fee, to the Secretary of State’s office. You can typically do this online, by mail, or in person.
6. Obtain an Employer Identification Number (EIN): Once your corporation is formed, you’ll need to obtain an EIN from the IRS. This number is required for opening bank accounts, hiring employees, and filing taxes.

After filing articles of incorporation, it’s just the beginning of operating as a legitimate corporation. After you obtain an EIN, you’ll still need to draft bylaws for the organization, open a corporate bank account, and make sure that you’re complying with regulatory requirements like maintaining corporate records and filing annual reports with the state.