Articles of Incorporation: Definition, Requirements, and Key Inclusions

What Are Articles of Incorporation?

Articles of incorporation are a set of formal documents filed with a government body to legally document the creation of a corporation. Articles of incorporation generally contain pertinent information such as the firm’s name, street address, agent for service of process, and the amount and type of stock to be issued. The articles of incorporation are used to legally form the corporation.

In-Depth Look at Articles of Incorporation

Many businesses in the U.S. and Canada are formed as a corporation, which is a type of business operation that is formed in the state where the company carries out its operations. To be recognized legally as a corporation, a business must incorporate by taking certain steps and making certain decisions required under corporate law. One such step is filing a document known as articles of incorporation.

Articles of incorporation are in the document necessary to register a corporation with a state and acts as a charter to recognize the establishment of a corporation. The document outlines the basic information needed to form a corporation, its governance, and the corporate statutes of the state where it’s filed.

Filing Articles of Incorporation: Offices and Fees

In the U.S., businesses file articles of incorporation with the state's Secretary of State office where they choose to incorporate. Some states offer more favorable regulatory and tax environments and, as a result, attract a greater proportion of firms seeking incorporation.

Delaware and Nevada attract about half of U.S. public corporations due to protective state laws. Once established, the articles become a public record and provide important information about the corporation.

Many states charge filing fees for businesses incorporating there, even if they don't operate in that state. A business incorporated in one state but operating in another must register in that state and pay its filing fees and taxes.

Depending on the state of incorporation, a company may pay filing fees ranging from $50 (as in Iowa, Arkansas, and Michigan) to $275 (as in Massachusetts) as of 2020. The fees can vary depending on whether the articles of incorporation were filed online or by mail.

Essential Requirements for Articles of Incorporation Documents

The contents of the articles of incorporation vary by state, but typically include the following:

1. Name of corporation
2. Name and address of the registered agent
3. Type of corporate structure (e.g., profit corporation, nonprofit corporation, non-stock corporation, professional corporation, etc.)
4. Names and addresses of the initial board of directors
5. Number and type of authorized shares
6. Duration of the corporation, if it wasn't established to exist perpetually
7. Name, signature, and address of the incorporator, who is the person in charge of setting up a corporation

Most states require the articles to state the firm's purpose, which can be broadly defined for operational flexibility. Amazon’s certificate of incorporation, for example, states that the corporation’s purpose is “to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.”

Other provisions outlined in a company’s articles of incorporation may include the limitation of the directors’ liability, actions by stockholders without a meeting, and the authority to call special meetings of stockholders. Each state has certain mandatory provisions that must be contained in the articles of incorporation and other optional provisions that the company can decide whether to include.

Comparing Articles of Incorporation and Related Documents

Articles of Incorporation vs. Bylaws

While the articles of incorporation are externally-filed formation documents, bylaws are more of use to a company when used internally. Bylaws outline the company's internal processes and organizational structure. Bylaws outline the rules and procedures for the management of a company. Not all states require a company to maintain bylaws, though many require a company to formally memorialize the bylaws.

Articles of Incorporation vs. LLC Operating Agreement

Articles of incorporation are required state filings to form a corporation, while LLC operating agreements are used exclusively for LLCs. In addition, the articles of incorporation outline the information structure of the company. Operating agreements often detail how to resolve disputes among members or owners. An LLC operating agreement acts more of a personal protection document than the articles of incorporation.

Articles of Incorporation vs. Business License

A business license allows a company to operate within a specific jurisdiction or industry. It gives the holder the right to start and run a business in the designed geographical location that issues the license. The rights granted by a business license are often more specific and niche than the articles of incorporation; though similar information may be required for both, the articles of incorporation simply legally form an organization and is the highest governing document for a corporation.

Articles of Incorporation vs. Business Plan

A business plan is an internal document that may be shared with major customers, investors, or lending institutions that communicates the formal operating plan of a company. Often a strategic document, a business plan is mainly used by internal management as a roadmap for decision-making. This is in stark contrast of the articles of incorporation which are information-only, non-strategic requirements for legal reasons.

The Critical Role of Articles of Incorporation

A corporation must carefully file its articles of incorporation, as these documents are very significant. For starters, they are legally required to structure a new business or company. The corporation can not form and be recognized by the state as a legal business entity until the forms are registered.

Once a business is incorporated, it often has a greater ability to raise capital via stock issuances. A corporation cannot sell stock until is incorporated via the filing of its articles of incorporation. Corporations may also receive more favorable tax treatment compared to individual or personal tax rates.

Also, personal liability is a key consideration when forming companies. Individuals are often held liable for a company's obligations until it is incorporated. By forming a legal corporation, business owners may be shielded from some personal liability for the company's debts. This liability protection cannot occur until the articles of incorporation have been filed.

Real-World Illustration of Articles of Incorporation

The image below captures the first few requirements from the Secretary of State form required by the state of Washington. This form is to be completed and returned to the government agency for review.

Some sections simply require a check mark for applicability or a 'yes/no' mutually exclusive selection. Other areas (such as the purpose of the corporation) require written response. As designated by the top of the form, this specific article of incorporation document template is for specific use for the formation of non-profit corporations.

The Washington State Articles of Incorporation form ends with the certification section in which an incorporator must certify the information given is correct to the best of their knowledge. The incorporator is also required to provide some personal information along with their signature.

The form above had been filed by Parrot Foundation, a Washington nonprofit organization. A snipped of Parrot Foundation's articles of incorporation has been provided below as an example of the dates, structure, and business purpose a company may request when filing its articles of incorporation.

The Bottom Line

If a company wants to become a corporation, it must file articles of incorporation with its appropriate state agency. This formation document is required as part of the incorporation process, and the articles provide the state a variety of information about the company and its incorporators. Different from other legal documents that outline how a company will operate internally, the article of incorporation is intended to help external parties evaluate and form a corporation.