The biggest advantage of corporations is the limited liability protections enjoyed by company owners. With a corporation, you will also be able to write off certain bills on your taxes, including dental bills, disability insurance, and benefits programs.
Corporations and limited liability companies LLCs are the two most common types of business entities. The formation documents for these two entities are very similar, but have different titles. Both organizations also have documents that govern how the business is run.
For a corporation, this governing document is called its bylaws, and for an LLC, the governing document is called an Operating Agreement. The Articles of Incorporation includes basic information about a company, including the purpose for its formation. Because most companies simply list their purpose as lawful business, many people view this section of the Articles of Incorporation as perfunctory. If a corporation decides to issue additional shares of stock or wants to change its name, the Articles of Incorporation must be amended.
Authorizing shares does not indicate the corporation's ownership. After authorization, the corporation would still need to issue these shares. Corporate bylaws are almost as important as Articles of Incorporation. The bylaws function as a corporation's constitution, outlining how the business will be operated.
With your bylaws, you can designate the location for your corporate offices, the rights of your shareholders, and what your officers and directors can do within the company.
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 are also referred to as the "corporate charter," "articles of association," or "certificate of incorporation. Many businesses in the U.
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, the governance of a corporation, and the corporate statutes in the state where the articles of incorporation are filed. In the U. For example, Delaware and Nevada attract about half of the public corporations in the U.
Once established, the articles become a public record and provide important information about the corporation. The articles in the document vary by state, but the following "articles" are typically included:.
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. Many states charge filing fees for a business that incorporates in the state, whether the business operates there or not.
A business that is incorporated in one state and is physically located or doing business in another state must register in the other state as well, which involves paying that state's filing fees and taxes. The fees can vary depending on whether the articles of incorporation were filed online or by mail.
Another key corporate document is the bylaws, which outlines how the organization is to be run. Bylaws work in conjunction with the articles of incorporation to form the legal backbone of the business. Office of the Illinois Secretary of State. Securities and Exchange Commission. Iowa Secretary of State. Arkansas Secretary of State. State of Michigan. Accessed Oct. However, to the extent that a charity wants to really lock in its purpose to prevent future boards from easily diverging from its original intended course, a specific purpose statement may be added to the articles of incorporation following the more broader statement exemplified above e.
This may be precisely what is desired and appropriate. On the other hand, consider the following scenarios in the case of the charity with the specific purpose statement limiting itself to furthering preschool education to children in the Richmond district:.
Also, all too frequently, charities begin pursuing other purposes outside of the scope of the purposes in their articles and fail to amend the articles. This may risk the charity and its board to charges of misrepresentation and acting beyond their powers ultra vires. Accordingly, charities should choose their purpose statement carefully.
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