What Are Articles of Incorporation?
Articles of Incorporation are corporate charters (documents) that are the foundational deed used to establish a corporation in North America. Normally, they are filed with the Secretary of State. The document goes for companies with a specific tax structure that is designated by "Inc." or "Corp." In fact, it is not one document, but a set of formal documents filed to officially create a corporation, hence being referred to either as Articles of Formation. You can find various Articles of Incorporation templates down below, be it for a non-stock corporation, professional corporation, and so on.
- Certificates of Incorporation.
A corporation should not be confused with Limited Liability Companies (LLCs) that need to file an entirely different set of articles. The main difference between the two lies in their tax structure. An LLC is taxed at the individual level (this type of taxation is known as pass-through taxation), a corporation is taxed both at the company level and at the individual level. There is also some difference as to the management structure of these two entities. Other differences include specifics of how profits and losses are handled by the two and how the ownership is dealt with.
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What Is the Purpose of Articles of Incorporation?
A vast majority of North American companies are registered as corporations. To be officially acknowledged as a corporation, your business must be incorporated. You do this by undertaking certain steps. The first step is filing the Articles of Formation for the company. By filing this document, you inform the local government of your plans to do business in that state.
There is a filing fee to incorporate in the state ranging from $50 (Iowa, Arkansas, and Michigan) to $520 (Massachusetts) if filed online. There may be an additional franchise tax. Another important document for corporations is the bylaws. It basically provides guidelines on how a corporation has to operate. Bylaws and the articles form the basis for the business.
Filing for a certificate of incorporation gives your company certain benefits that a simple business does not possess. For example, you may acquire enormous benefits in the form of tax exemption and protection from creditors. The articles become a public record listing all the important information about the business: its name, address (including the address of the registered agent), type of structure (profit, non-profit, non-stock, etc.), names of the board of directors, numbers of the authorized shares, people that own the corporation (stockholders), duration (if applicable) and name and address of the incorporator (person responsible for the corporation set up). This is not a complicated document. Basically, it requires the kind of information any business would provide for transparency.
Related Tags and Topics:
- Corporation Bylaws;
- Corporate Resolution;
- Certificate of Incorporation.