[Start-Ups 101] What are the Articles of Incorporation?
Did you have a great idea this year for a new product or service? If you have not created a legal entity for your new company, now is the time to do so. Forming a legal entity for your company offers a variety of protections for you and your business idea. A DC fractional general counsel can help you decide which business entity is best for your company and guide you through forming a business entity, including forming a corporation.
Corporations Offer a Variety of Benefits for Entrepreneurs
Corporations are a popular business structure. Many entrepreneurs choose this type of entity for their new business. One of the most common reasons for choosing a corporation as your business entity is the level of protection from personal liability you receive by incorporating your business. Officers, board members, and shareholders cannot be held personally liable for corporate debts, liabilities, and obligations except in very limited circumstances, such as fraud or failing to adhere to corporate formalities.
Other advantages of forming a corporation include:
Easier to attract investors and raise capital for the company;
Corporations can exist indefinitely, even if the original owners leave the company;
Ease of transferring ownership interest;
Corporations enjoy certain tax advantages, such as deducting the cost of health insurance premiums and other employee-related benefits and expenses;
Some retirement plans are easier to form through a corporation; and
Incorporating a company can help establish credibility with investors, lenders, customers, and vendors.
Of course, there are aspects of corporations often viewed as disadvantages.
Corporations are subject to double taxation, additional record-keeping to maintain corporate formalities, additional expense to set up, and ongoing government fees and filing requirements. However, depending on your needs and long-term goals, the advantages of incorporating may greatly outweigh any perceived disadvantages of incorporating.
How Do I Form a Corporation?
To create a corporation, you must file Articles of Incorporation. The Articles of Incorporation are filed with the agency governing companies in the state in which your corporation will exist. Typically, that agency is the state’s Secretary of State. Most Secretary of State offices have a corporate division or a business division that handles company filings, including Articles of Incorporation.
The state in which you incorporate is usually called your home state. That state views your company as a domestic corporation. All other states view your corporation as a foreign corporation, even though you incorporated within the United States. To do business in another state, you must file documents requesting authorization to do business within the state (called “qualified” to do business).
“Most Secretary of State offices have a corporate division or a business division that handles company filings, including Articles of Incorporation. ”
— Steve Thienel
What is Included in the Articles of Incorporation?
Most states have specific forms you can use for your Articles of Corporation. The Articles are simple. Often, the Articles of Incorporation are just two pages that contain general information about the corporation.
Even though state law varies regarding what information must be included in the Articles of Incorporation, most states require basic information, including:
Name of the corporation;
Mailing address and principal place of business;
Corporate purpose, which can usually be a broad, non-specific statement;
The beginning date of the corporation and duration of the corporation. If no dates are listed, the beginning date will be the date of filing and there will be no ending date (the company will be assumed to exist perpetually);
The name and address of the registered agent for the company (the person who can legally receive notices and service of process for the corporation);
Information about the classes of shares the corporation may issue and the number of shares it can issue;
Names and addresses of each of the incorporators; and,
Names and addresses of the initial board of directors (required by some states).
Most states have standard Articles of Incorporation forms free of charge.
“Always check with your state to determine the filing requirements for the Articles of Incorporation. ”
— Steve Thienel
Filing Your Articles of Incorporation
Always check with your state to determine the filing requirements for the Articles of Incorporation. The filing fees for filing Articles of Incorporation vary as does the filing requirements. For instance, some states require that you file a specific number of copies of the Articles. If you desire a certified copy of the filed Articles, you might have to pay an additional fee and provide a stamped, addressed envelope.
Some states also require that companies file a copy of the corporate bylaws with the Articles of Incorporation. Bylaws are the rules and policies for operating the corporation. Often, bylaws are internal documents not filed with the state. However, a few states require copies of the bylaws, so it is always best to check the specific state requirements in the state in which you incorporate and in any states in which you desire to qualify to conduct business.
Seeking Help from a DC Fractional General Counsel
Articles of Incorporation create the legal entity for your company. Completing and filing the Articles of Incorporation is the first step in setting up your legal entity. However, that is not the only step you need to take when creating a corporation. You also need to address numerous tax, funding, legal, shareholder, and accounting matters to operate your new business.
Consulting with an attorney familiar with these matters can help you ensure that you do not overlook an important matter that could cause time-consuming and expensive legal problems.
A DC fractional general counsel provides affordable, tailored legal services that cover matters, including but not limited to:
Corporate formation
Drafting bylaws
Creating employee handbooks and employment agreements
Developing employee benefits
Setting up the Board of Directors and arranging for mandatory meetings
Issuing stock certificates and arranging for the first stockholder meeting
Reviewing, negotiating, and drafting contracts
Reviewing tax implications and requirements
Reviewing and negotiating leases, rental agreements, and loan applications
Reviewing funding options and investor options
Reviewing compliance matters, including applying for required licenses, permits, and other regulatory requirements
Managing an organization’s legal matters
Preserving corporate records and legal documents
If you have questions about forming a corporation or need assistance with legal matters, contact DC fractional general counsel, Steve Thienel today to discuss how we can help you with all your legal needs.
