Articles of incorporation
Articles of incorporation, also referred to as the certificate of incorporation or the corporate charter, are a document or charter that establishes the existence of a corporation in the United States and Canada. They generally are filed with the Secretary of State in the U.S. State where the company is incorporated, or other company registrar.
History of Corporations in the United States
After fighting the American Revolution with Great Britain, the founders of the United States had a healthy fear of corporations after being exploited for years by those in England. As a result, they limited the role of corporations by only granting select corporate charters, mainly to those that were beneficial to society as a whole. For the better part of the first one hundred years of United States history, the power of corporations was severely limited as owners could not own any stock or property, make financial donations to a political party, and legislators could dissolve a corporation at any time relatively easily. Corporations did not have the same corporate veil of protection that are enjoyed today.
The shift towards corporations gaining more power and control happened as the United States progressed towards industrialization. The American Civil War wildly enriched corporations and with this new wealth came bribes to legislators and courts that allowed for increased liability protection and other corporate protections. The 1886 Supreme Court case Santa Clara County v. Southern Pacific Railroad set the important legal precedent that corporations were “natural people” and as a result were protected under the 14th Amendment. In the century and a half to follow, corporations have gained more control and hardly resemble what the founders of the country had intended.
The articles of incorporation outline the governance of a corporation along with the corporate bylaws and the corporate statutes in the state where articles of incorporation are filed. To amend a corporate charter, the amendment must usually be approved by the company's board of directors and voted on by the company's shareholders.:10
The articles of incorporation typically include the name of the corporation, the type of corporate structure (e.g. profit corporation, nonprofit corporation, benefit corporation, professional corporation), the registered agent, the number of authorized shares, the effective date, the duration (perpetual by default), and the names and signatures of the incorporators.
The state fee to file articles of incorporation to incorporate a profit corporation range from $50 - $300, and to incorporate a nonprofit corporation range from $0 -$125.
How to File
The first step in filing articles of incorporation is for the owners to decide which state to incorporate the business in. Once the state has been chosen, the documents with all the corporation’s information have to be filled out, whether physically or virtually. Once completed, these documents will be reviewed by the secretary of state’s office, and upon approval from the state government and payment of a filing fee, the company has officially become a legal corporation.
The following information is required upon filing Articles of Incorporation in the United States:
- Name of the Business
- Location of Business
- Whether or not the Corporation is for profit
- Names and Addresses of Incorporators
- Names and Address of who will receive mail and where
- Names and Addresses of Officers
- A statement that summarizes the core purpose of the business
- The number of authorized shares of stock
- Other information may be required upon filing but this varies from state to state
Where to File
Many corporations file in the state in which they are doing business, although this is not required by law. Corporations doing business in multiple states often file articles in the particular state that is the most lenient on corporations. A majority of public corporations in the United States file in Delaware or Nevada, although Wyoming is a popular choice as well.
Over 60% of Fortune 500 companies and 75% of new corporations every year are incorporated in the state of Delaware due to the state’s favorable corporate treatment. The state’s unique court, the Court of Chancery, allows corporate disputes to be heard without a jury within a reasonable time compared to non-corporate disputes. State corporate laws are very modern and specifically detail what a corporation is allowed to do, and as a result other states often try to emulate Delaware’s legal corporate model. There is even further protection for corporations via the Delaware Asset Protection Trust in which personal assets are protected in the event of litigation. In order to abide by securities laws, some companies are even required to incorporate in Delaware.
Despite having the highest registration fee in the United States and a negative stigma, Nevada is a very popular state for incorporation. The main reason for this is that the corporation does not have to pay any of the numerous state taxes. Similar to Delaware, some companies are mandated to incorporate in the state in order to be in compliance with securities law. Filing in Nevada also affords the corporate owners privacy as the state does not require names to do so. Unlike many other states, the corporation does not have to do business nor do any of the owners have to be a resident in the state to incorporate there.
The standard filing fees owed in the process of incorporating are zero in Wyoming, and the only fee owed is minimal compared to other states. Other favorable corporate laws include asset protection for owners as well as confidential information protection through requiring the usage of private data servers. Being a United States citizen is not a prerequisite for incorporating in the state, although there are countries of origin where businesses are ineligible. The state is one of the best in terms of fiscal health, and as a result corporation owners do not have to file personal income taxes.
Articles of Incorporation are appended to a Certificate of Incorporation and become the legal document that governs the corporation. In Canada, the process of incorporation can be done either at the federal or provincial level. Companies which incorporate with the federal government will generally need to register extra-provincially in the province that they elect to do business. Similarly, a provincial corporation may need to register extra-provincially if they are to have offices outside of their home province. Incorporated Canadian companies can generally use either Corp., Corporation, Inc., Incorporated, Incorporée, Limited, Limitée, Ltd., Ltée, Société par actions de régime fédéral, S.A.R.F, in their name, but this may vary from province to province.
The following information is required upon filing Articles of Incorporation in Canada:
- Name of Business (Numbered and Named)
- Head Office
- Names and Residencies of Incorporators
- Proof of Canadian Citizenship
- Corporate Share Structure
- Anticipated Business Restrictions
- Articles of association
- Articles of organization
- Certificate of incorporation
- Mission statement
- Operating agreement
- "Our Hidden History of Corporations in the United States". Reclaim Democracy!. 2000-02-01. Retrieved 2020-12-18.
- Hirst, Scott (2017-01-01). "Frozen Charters". The Harvard Law School Program on Corporate Governance Discussion Paper. No. 2016-01.
- "What are Articles of Incorporation? | Harbor Compliance". www.harborcompliance.com. Retrieved 2020-11-15.
- Entity formation fees .
- "Why do so many corporations choose to incorporate in Delaware?". WHYY. Retrieved 2020-12-18.
- Giacopelli, James. "Council Post: The Benefits And Pitfalls Of Incorporating In Delaware, Nevada And Wyoming". Forbes. Retrieved 2020-12-18.
- "Top 3 Best States to Incorporate a Business | LegalNature". www.legalnature.com. Retrieved 2020-12-18.
- Government of Canada, Industry Canada. "How to incorporate a business". www.ic.gc.ca. Retrieved 2020-12-18.