What Are Articles of Incorporation?
REtipster does not provide legal advice. The information in this article can be impacted by many unique variables. Always consult with a qualified legal professional before taking action.
What Are the Components of the Articles of Incorporation?
The articles of incorporation serve as official certificates for the existence of newly formed organizations. All corporations, in particular, are required to accomplish this document and file it with the Secretary of State before the state officially and legally recognizes them.
The requirements for this document vary from state to state, such as the company’s name, address, and purpose. However, the following are some of the most common information required by most states.
This is the company’s official name and thus its legal identity. Some states require “inc.,” “incorporated,” “corporation,” or “ltd.” as part of the business name to clarify that it has been incorporated.
The address of the business’ principal location is often required to ascertain its physical existence. If it has multiple locations, one must be designated as the official mailing address.
Purpose of the Business
This purpose must be lawful, or the corporation cannot be formed.
Type of Corporation
The main types of a corporation include non-profit corporations, stock corporations, and non-stock corporations.
Name and Address of the Registered Agent
All businesses must work with an in-state registered agent, who will be the primary contact between the business and the state. The agent will ensure smooth document filing for compliance and relay official state communication and legal requirements between the two parties.
Name and Address of the Incorporator
The incorporator is the person who sets up the articles of incorporation and files the document (and other requirements) with the Secretary of State. The incorporator may be anyone related to the formation of the corporation, such as the owner/s, one of their attorneys, or a representative, and usually signs off on the document itself.
A registered agent and an incorporator are different individuals and should not be confused with each other. While corporations work with a registered agent throughout their lifetime, an incorporator’s duty usually ends once the corporation is established, unless the business deems it necessary.
Names of Company Officers or Directors
Directors or company offices are those responsible for the company’s formation. The board of directors may change at any point in the corporation’s lifetime, but the names and addresses of the initial entities are sometimes required when incorporating a business.
Some states require incorporators to fill out the duration of the entity, such as when making a non-profit organization for a certain charitable purpose. However, some states also do not have such requirements, as it is assumed that the corporation will operate in perpetuity.
Shares and Par Value
If the business is a stock corporation, it is required to disclose the types of shares they offer and fix them to the lowest amount they are allowed to sell stocks or shares, known as par value. In turn, all entities that purchase shares from the corporation—including the founders—must pay the par value or higher per stock. Otherwise, they will owe the difference as debt to the corporation.
The par value of common stock is often under $1 no matter the company’s size. For instance, if an investor were to purchase 100 shares from a real estate corporation with a par value of $0.5, they must pay a minimum of $50 for the lot. Any excess amount would then be credited as paid-in capital.
Changes to the Articles of Incorporation
Online law resources offer templated articles of incorporation suitable for various states. However, some states may permit incorporators to modify specific requirements to suit their business needs as long as they comply with state laws. In that case, businesses must work with their registered agent to create a personalized document.
Each state charges a fee for filing for an article of incorporation, whether customized or standard.
A corporation’s internal operations may change eventually to the point of needing to amend its articles of incorporation. The process can be complicated depending on the information that needs to be changed.
A corporation can amend information with the Secretary of State. Note that certain information cannot be amended, depending on state regulations.
For more complex changes, such as changing the purpose of the business or internal practices specified in the document, the corporation’s board of directors and shareholders must vote for or against the proposed changes first. If the changes pass, they must then file a formal proposal in writing and submit it to the Secretary of State.
Businesses need to amend their articles of incorporation whenever huge changes occur within the company, as the document reflects their identity and operations. Doing so will also help them stay within legal bounds. In the worst-case scenario, the Secretary of State may have to invalidate the business.
Searching for Articles of Incorporation
Articles of incorporation are considered public records. Therefore, anyone can access them online by searching for a corporation from the state website. This function is usually available through the “business search.” Most state websites provide a search guide to help interested individuals find the information they need.
Many investors find this function valuable. For example, the state website indicates a company’s exact legal name and lawfully registered address, which can help catch discrepancies before signing contracts and related documents. In addition, state websites store PDFs of the actual articles of information and statements of information filed by the business, further verifying the legitimacy of the registered corporations.
On that note, if investors cannot find the appropriate article of incorporation, they can get in touch with the Secretary of State before signing a company off their list, as the website may not be fully updated at the time of searching.
Articles of Incorporation vs. Bylaws
Most people often confuse the articles of incorporation with bylaws, which are two documents that describe information about the company. However, the difference is that the articles of incorporation are a set of charter documents that establish the company, while the bylaws are a collection of internal rules that set out how the company operates.
The articles of incorporation can be accessed by the public, but the bylaws are only accessible to the company’s stakeholders, such as its employees.
- The articles of corporation are a set of legal documents that set out important information for a corporation, such as its name, address, and purpose of the business.
- Key individuals like the incorporator/s and the registered agents of the company as well as its board of directors are in this document.
- Unlike bylaws, the articles of incorporation are a matter of public record, allowing investors to check the legitimacy of a business they want to invest in or conclude a transaction with.
- Corporate Finance Institute. (n.d.) What are Articles of Incorporation? Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/other/articles-of-incorporation/
- ContractsCounsel. (n.d.) Articles of Incorporation.Retrieved from https://www.contractscounsel.com/t/us/articles-of-incorporation
- Steingold, D. (n.d.) Articles of Incorporation. Nolo. Retrieved from https://www.nolo.com/legal-encyclopedia/articles-incorporation.html
- Murray, J. (2020). Do I Need a Registered Agent for My Business? The Balance Small Business. Retrieved from https://www.thebalancesmb.com/do-i-need-a-registered-agent-for-my-business-397769
- Averkamp, H. (n.d.). What is par value? AccountingCoach. Retrieved from https://www.accountingcoach.com/blog/what-is-par-value
- Akalp, N. (2015.) Fees for Incorporating by State: Understand Your Costs to Become a Corporation. CorpNet. Retrieved from https://www.corpnet.com/blog/fees-incorporating-state-understand-costs-corporation/
- Registered Agents of California. (n.d.) How to Amend Articles of Incorporation in California. Retrieved from https://www.californiaregisteredagent.com/california-corporation/articles-incorporation/amendment/
- LegalNature. (n.d.) Changing Bylaws and Articles of Incorporation: How and Why. Retrieved from https://www.legalnature.com/guides/changing-bylaws-and-articles-of-incorporation-how-and-why
- Wong, B. (n.d.) How to Find Articles of Incorporation in the Public Record. LegalZoom. https://info.legalzoom.com/article/how-find-articles-incorporation-public-record