Definition of Articles of Incorporation
Articles of incorporation are specific to the corporation format of business and include the details of how the internal governance of the corporation be structured and any rules and regulations that the corporation will internally follow as long as they are within the lawful framework of the state in which the corporation is getting itself registered.
There can be different terminologies used for a similar document according to the nature of the business organization or the geography. For example, the Limited Liability Companies (LLCs) have Articles of an organization that convey similar details while some geographies, such as India, have Articles of association under the Indian companies act.
Purpose of Articles of Incorporation
- Defining the Company Policies: As a corporation has a lot of work it needs to accomplish, it needs structure and a framework to act within and accomplish the work quickly and efficiently. Having an article of incorporation at its disposal helps it to quickly refer and develop its procedures to accomplish the tasks ad had and function efficiently
- Getting Approval from the State Authorities: Without the articles, the authorities won’t be able to assess the validity of the business that the corporation is intending to undertake and so they won’t be able to grant it a go-ahead for the business. No corporation can initiate and business without having an article of incorporation because it is mandatory for the corporation to come into existence
- Legal Binding: The corporation is legally bound by the information given in the articles and so in case the corporation abuses its powers or acts not according to the articles, the state or any internal stakeholder can make the corporation adhere to the articles.
- Accountability & Responsibility: The information related to the registered agent helps the authorities in finding a representative of the corporation to take necessary actions on its behalf.
Information Necessary in Articles of Incorporation
Although the format of the Articles may vary from state to state, there are certain pieces of information that are found in almost every format. Referring to the Articles of EFPEE Corporation filed in the State of Illinois on June 29, 1971, some of the items that form part of the articles are as follows:
- Name of the corporation
- Address of registered office
- Duration of the corporations: At times some corporations may exist for only a limited period of time and so much time frame should be mentioned, however, if a corporation is operating as a going concern, then it may write ‘perpetual’ in this field
- The purpose for which the corporation has come into existence: For example, if the organization wants to operate in the Real estate sector, it may mention what kinds of activities will it perform, such as buying, leasing, developing, building real estate and so on. Most corporations keep this field as broad as possible so that in future if they wish to expand within the given domain, they can easily do so without amending the articles
- Authorized capital information
- Information on the board of directors
- Information about the registered agent of the company
- Any specific bylaws of the company: Such bylaws may include information on the process of voting in board meetings or the process of the retirement of the directors and so on
This is not an exhaustive list of information to be presented in the articles, but these give the drift of what are the possible contents in the Articles of incorporation.
The requirement of Articles of Incorporation
- Filing and Fee Payment: At the time of filing the articles of incorporation, the state authorities provide forms that are required to be filed along with the articles to give an overview of the articles and for other state-specific reasons. At this stage, the corporation is required to pay the fee as per the guidelines of the state authority. The amount of such fee varies from one state to another. Until and unless such fee is not paid, the incorporation process is not complete.
- Within the state laws: Even if the articles pertain to the internal matters of the corporation, these policies can’t be beyond the laws and regulations of the state in which it wishes to operate, such abidance is mandatory.
Articles of Incorporation vs Articles of Organization
Even though the content of both the documents is very similar, there are still some differences between the two which are explained as follows:
- Nature of Business: The articles of incorporation deal with the corporation form of business while the articles of an organization deal with the limited liability company form of a business.
- Number of Registered Agents: The articles of incorporation require the information of 3 registered agents while the articles of the organization require the information of only one registered agent.
Conclusion
We can now conclude that the Articles of incorporation are the documents that are required by a new corporation to come into existence and it is at times also known as the certificate of incorporation. It specifies certain details about the corporation as per the guidelines of the state in which it wishes to operate and the corporation is legally bound by the information mentioned in these documents.
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These can be filed at the federal level also if the corporation wishes to operate in different states and apart from the US & Canada, it is a common piece of document in many countries or business structures, even if it is called by a different terminology such as ‘Articles of association’ or ‘Articles of organization’ in case of an LLC, but such documents may vary slightly from state to state or from one business structure to another.
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