To legally establish your business as a corporation, you'll need to file articles of incorporation with your state.
Updated Oct 27, 2020 · 3 min read Written by Priyanka Prakash Priyanka Prakash
Priyanka Prakash is a former Fundera.com staff writer and a freelancer specializing in small-business finance, credit, law and insurance, helping business owners navigate complicated concepts and decisions.
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Assistant Assigning Editor | Small-business finance, personal finance
Christine Aebischer is an assistant assigning editor on the small-business team at NerdWallet who has covered business and personal finance for nearly a decade. Previously, she was an editor at Fundera, where she developed service-driven content on topics such as business lending, software and insurance. She has also held editing roles at LearnVest, a personal finance startup, and its parent company, Northwestern Mutual. She is based in Santa Monica, California.
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As an aspiring entrepreneur, you might have a lot of plans about starting a business . But officially launching your business requires more than just a great idea. To create a new corporation, you’ll need to file articles of incorporation.
Articles of incorporation, also known as certificate of incorporation or corporate charter, are a legal document that you file with your state’s business filing agency to establish a C corporation or S corporation. The document contains basic business information, such as company address and number of shares. Once approved by the state, the articles legally establish your corporation.
In this guide, we'll go over what information goes in your articles of incorporation, how to file and fees, as well as some post-filing tips to complete the launch of your new company.
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ZenBusiness Starting At Read ReviewArticles of incorporation vary slightly from state to state, but most states have similar requirements. You can access your form by visiting your state’s business filing agency online. In most states, this means the secretary of state’s or attorney general’s website.
Most include the following information:
Corporation’s name : This is the company’s legal name, usually ending in a corporate identifier like "Corp." or "Inc."
Corporation’s address : This is your business’s principal operating address in the state where you’re filing.
Registered agent : This is the individual or company that will receive official documents on your business’s behalf.
Business purpose : Some states have a general statement authorizing the business to engage in any lawful purpose, but other states require a more specific description of your business’s products or services.
Directors and officers : Some states require you to provide the names and addresses of directors and officers. Directors are responsible for overall strategy and corporate planning. They are elected by shareholders and appoint the officers. Officers — like chief executive officer, treasurer and chief financial officer — are responsible for running the business on a day-to-day basis.
Number of shares : C corps can issue an unlimited number of shares, whereas S corps are limited to 100 shares. Your articles should specify the number of shares, but you don’t have to issue all of them. Businesses often leave some shares unissued to expand and bring on more shareholders.
Class of shares : C corps can issue different classes of stock (common and preferred), whereas S corps are limited to one class of stock. In a C corp, preferred stock usually is designated for investors who get first access to dividends and distributions of assets.
Incorporator : The individual or legal service company that fills out and files the form is the incorporator.
There are three main ways to file your articles of incorporation, each with their own pros and cons:
File yourself through the secretary of state’s office. File through a legal help site. File with a lawyer’s assistance.Filing yourself through the secretary of state’s office is the fastest and most affordable option. Most states now allow online filing. You just have to pay the filing fee, ranging between $100 and $300 depending on the state.
Legal service sites — such as LegalZoom, Rocket Lawyer and IncFile — offer a little extra help in filing. These services will walk you through a step-by-step questionnaire about your business that includes all the information in the articles of incorporation. The company will then fill out and submit the form on your behalf. In this case, you’ll have to pay the state filing fee plus the site’s fees. Legal services sites usually charge around $150 for filing articles of incorporation.
The last option is to hire a lawyer to help you file. Most businesses can handle filing on their own or through a legal help site. But if you already have a business lawyer on retainer or have a more complicated situation (e.g., thousands of shares or subsidiaries within your business), hiring a lawyer can be helpful. Actually filing the articles doesn’t take long and won’t cost you much. But a consultation with a lawyer could help you avoid problems down the line.
Once you file — assuming everything was filled out correctly and completely — the state will file the paperwork and officially register the business name. You’ll receive a formal certificate of incorporation in the mail. You should save a copy of this certificate as well as a copy of the articles of incorporation with your corporate records.
Most small businesses incorporate their company in the state where their office or shop is located.
This is probably the easiest option, but you can choose to incorporate your business in any state, regardless of where your business is physically located. For example, Delaware and Nevada are popular “incorporation havens” because of their favorable tax laws and corporation-friendly legal systems.
These are some variables to keep in mind when deciding where to incorporate your business:
Formation fees. Annual fees and filings. Corporate taxes and franchise taxes. Legal system. Investor preferences.If you choose to incorporate in one state but do business in another, you’ll have to qualify as a foreign corporation in the state where you operate. This requires some additional paperwork, and it could also increase your tax bill. For instance, if your company is incorporated in Delaware but does business in New York, you’ll have to pay New York state income taxes on business income plus a “franchise tax” for being incorporated in Delaware.
Once you've successfully filed your articles of incorporation, there’s still additional work to be done to legally operate your business and ongoing filing requirements to maintain your status as a corporation. This includes:
Initial report : Several states require you to file an initial report within a month or two of your incorporation. Initial reports contain up-to-date information about your business’s directors and officers, location and registered agent. In a lot of ways, it might seem like a repetition of the articles of incorporation.
Publishing requirement : Most states require you to publish a notice in a local newspaper that contains your business’s name, address, number of shares and other information from your articles.
Annual report : Annual reports usually contain detailed financial data for prospective shareholders and the public. States vary in the specifics, but you typically have to submit them by March or April after the year of incorporation.
Corporate bylaws : Corporate bylaws contain the blueprint for running the corporation and are far more detailed than the articles. They set out the rights and responsibilities of shareholders, directors and officers.
Hold board of directors meeting : After incorporating, hold your first board of directors meeting and document the minutes and any resolutions the board takes.
Hold shareholder meeting : You’ll also have to hold and document your first shareholder meeting. At this meeting, you’ll issue shares of stock and record the transfer.
Elect S corp status (optional) : To organize your company as an S corporation, you’ll need to file Form 2553 with the IRS.
Handle administrative matters : As part of company setup, you’ll also need to obtain any local business licenses, apply for an employer identification number (required for corporations), and open a business bank account . You also should determine your state’s deadlines for filing corporate taxes and franchise taxes.
This article originally appeared on Fundera, a subsidiary of NerdWallet.
