When you start a company, formal incorporation is an important step. A certificate of incorporation allows a company to be formally registered with state authorities and officially form a legal entity. While there are many different issues addressed within the certificate of incorporation, depending on the state, these documents share important governance elements. If you are considering incorporating your company, it may help to speak with a Priori lawyer about what decisions you will face during the process and for help drafting a certificate of incorporation.
About Certificates of Incorporation
A certificate of incorporation, also called articles of incorporation, constitutes a major part of the formal legal documents incorporating a company under state law. Every company that plans to incorporate as a corporation or LLC will need some type of this document before incorporation paperwork can be completed. Even partnerships and other legal entities need similar (albeit less complex) agreements. Once a company drafts the certificate of incorporation, it must be signed by the Secretary of State in the state where the company intends to incorporate in order to be effective.
Structure of Articles of Incorporation
Certificates of incorporation are structured differently in each state. At the very least, the structure of a company’s articles of incorporation will include basic information about the governance of the company, including its name, address, type of corporate structure, registered agent, number of authorized shares, effective date, and if relevant, duration. In addition, many articles of incorporation will be paired with information on its bylaws and other relevant information under state corporate statutes.
The purpose of the certificate of incorporation is to address its basic governance. These sections address the basic legal structure of the corporation and its type. The articles of incorporation can be either fairly specific or detailed, but generally these documents will be more dictated by state law than company preference. It’s important to note that some types of corporations, such as nonprofit corporations, require very exact governance, while other structures are much more flexible, such as LLCs.
Bylaws are often submitted in conjunction with the articles of incorporation in order to establish the full governing documents of the company. Bylaws are legal documents defining how a company operates, both on a day-to-day basis and in terms of management. Issues such as how directors are elected, what responsibilities directors have, how board meetings are conducted, and what officers must do within their duties are commonly addressed. A final section also generally addresses how bylaws can be amended.
State Corporate Statutes
Every state has different requirements for documents and provisions within the certificate of incorporation. These state corporate statutes must also be properly addressed. A common example includes requiring a company to state the firm’s purpose (although this is usually done quite broadly to maintain operations flexibility). Other states require varying levels of specificity and disclosures regarding ownership and management, minority shares, and taxation, among other issues.
Are authorized shares always defined in the certificate of incorporation?
If there is any outstanding stock, yes. This will naturally change over time, though, which is why most companies also lay out procedures to amend authorized shares in the articles of incorporation.
Where do I file the certificate of incorporation?
The certificate of incorporation must generally be filed with the office of the Secretary of State in the relevant jurisdiction, but this process will depend on where your company plans to incorporate.