What is a Certificate of Incorporation vs AOI?
Knowing what a certificate of incorporation vs articles of incorporation is can be important when forming a business.3 min read
Knowing what a certificate of incorporation vs articles of incorporation is can be important when forming a business. These are both essential documents that serve different purposes. One of the first steps when forming a corporation is to file the articles of incorporation in the state where you plan to operate. This is often with the office of the Attorney General or Secretary of State. Some states call this the certificate of incorporation.
Articles of Incorporation Vs. Certificate of Incorporation
Previously, some states like Illinois sent filers a document with the same name as proof of filing, but this isn't the case anymore. The names of the forms can vary, but the information that's disclosed on the document is the same between each state. It will include the following:
- Name of the company
- Address of the company
- Purpose of the company
Articles of incorporation are where formal documents get filed with the government to document the formation of a corporation. They must have important information such as the firm's street address, name, how much stock and what type will be issued, and the name of the agent for service of process. Many companies in the United States and Canada are formed as a corporation, which is a form of business operation that is created in the state and carries out the company's operations.
Articles of incorporation are filed in the United States with the Secretary of State's office. This is done in the state where the company decides to incorporate. Some states have more favorable tax and regulatory environments, which causes large amounts of firms to seek incorporation. For example, Nevada and Delaware attract around 50 percent of public corporations. This is mainly because they offer great tax advantages and because directors, officers, and shareholders don't need to be residents in the states. When they become established, the articles become public and others will be able to view important information regarding the corporation.
What Is a Certificate of Incorporation?
The certificate of incorporation must include the company's purpose, the corporation's name, the name and address of any incorporators, the company's registered office address, how many shares will be authorized and issued, and a description of the classes of stock. There may be certain issues that a corporation also wants to include. Some provisions will only be effective if they're in the certificate.
This includes the following:
- Limiting, creating, and regulating the powers of the directors, corporation, and stockholders
- Limiting what the duration of the corporation is
- Limiting the stockholders' personal liability for the corporation's debts
- Giving stockholders the right to subscribe to extra issuances of stock
Delaware law lets corporations change the certificate how they want as long as it's still legal. The certificate can be amended before the corporation gives out stock by writing out the change and verifying the corporation didn't get paid for their stock.
Most of the incorporators need to sign the amendment if the directors haven't been listed or elected in the original certificate or by the majority of directors if they've been named and elected in the original certificate. Once the stock gets issued, the certificate can be repealed or amended by the board's approval. Both holders of the outstanding shares and holders of each class of stock are entitled to cast their vote.
Once an amendment gets adopted, the corporation needs to file a certificate of amendment with the Delaware Secretary of State so the amendment will be effective. The articles of incorporation and certificate of incorporation are interchangeable words in some states, such as California. Many people use either of these words when talking about the articles or certificate of incorporation.
The name of the company should be identified in the documents. The name should not be similar to any other corporations that have been created in the state. It needs to have an identifier, such as limited, LLC, or incorporated. Some states have a database where you can search online to see if the name is already being used or not. You can often reserve the name if it's not being used for a fee.
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