Articles of Incorporation
What are Articles of Incorporation?
Articles of Incorporation refer to a legal document that outlines the fundamental details about a corporation. These include its purpose (why the business was started), location, structure, and ownership. It’s filed with the appropriate government agency in order to formally establish the business as a corporation and is essential for obtaining licenses and permits, opening bank accounts, and managing and running a business. They might also be referred to as articles of association.
The history of Articles of Incorporation
The concept of Articles of Incorporation dates back to ancient Rome, where corporations were created by special acts of legislation. In the US, the first modern corporations were formed in the late 18th century, and articles of incorporation became a standard legal requirement in the 19th century. Today, the process for creating Articles of Incorporation varies by state, just as registering a business does, but they generally include similar content.
What do Articles of Incorporation include
If you’re looking to start a business or corporation you’ll need to include the following:
Corporate name and purpose
Rights and powers of shareholders and board members
Number of shares authorized
Description of classes of stock
Registered agent information
Bylaws relevant to the business
These requirements may vary from state to state, so be sure to check with the state you’re looking to register your corporation in before filing the articles.
What benefits do Articles of Incorporation confer
Filing Articles of Incorporation are not only usually a necessary legal requirement for establishing a corporation, they also offer the following benefits and protection:
Limited Liability Protection for shareholders
Clear ownership structure and management hierarchy
Institutional credibility with clients, vendors, and investors
Access to capital through Issuance of Stock
Possible tax benefits
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Examples of Articles of Incorporation
One example of a company that has effectively used Articles of Incorporation is Google. Their Articles of Incorporation include a unique stock structure that allows the founders to maintain control over the company, even as it has grown to become one of the largest corporations in the world. Another example is Starbucks, which includes in its Articles of Incorporation a commitment to social responsibility and ethical business practices.
These are often displayed on a business website.
Best practices for creating Articles of Incorporation
As a legal document we recommend you do the following before writing and filing your articles:
01. Consult with an attorney or business advisor
02. Create a clear and concise document
03. Include provisions for future changes and growth
04. Ensure compliance with state laws
05. File the Articles of Incorporation with the Secretary of State
Challenges associated with writing Articles of Incorporation
One potential challenge associated with writing your Articles of Incorporation is the cost and complexity of creating them - they're a legal document and should be treated as such. Also, once a corporation is formed, it must comply with ongoing reporting and regulatory requirements. This might include an annual re-filing free, as one example.
Articles of Incorporation FAQ
What is the purpose of Articles of Incorporation?
Their purpose is to establish the legal existence of a corporation and provide a framework for how it will operate.
Do all businesses need Articles of Incorporation?
No, not all companies need them. Sole proprietorships and partnerships are not required to file articles of incorporation because they are not separate legal entities from their owners.
Can Articles of Incorporation be changed?
Yes, articles of incorporation can be changed through a process called amending the articles. This usually requires a vote by the board of directors and shareholders, and compliance with state laws.