1. Difference Between Corporate Charter and Bylaws
2. Things to Consider

A corporate charter definition may also be known as the Articles of Incorporation. Regardless of the terminology used, all states require this documentation for a business to incorporate, as it defines the overall purpose of the business and governing or managerial structure. Additionally, this document must be filed with the Secretary of State in whichever state the company is being incorporated.

Information that is typically found in a corporate charter or articles of incorporation include:

  • Name and address of the company
  • The purpose of the business (sometimes also referred to as a mission statement)
  • Any special determinations regarding the company (for example, whether or not it is a nonprofit organization)
  • The types of stocks or shares the company has and how they are bought, sold, or otherwise issued
  • Who comprises the Board of Directors, along with their addresses and other business affiliations

When filing your corporate charter or articles of incorporation, you will probably have to pay a monetary fee to your state’s Secretary of State; in some cases, an additional deposit may be required, equal to that of (estimated) one year’s business tax for your company. Once the corporate charter is filed with, and approved by, the secretary of state, the business is considered incorporated in that state.

It is not unusual for a company to redefine certain areas of their operations -- perhaps the purpose changes somewhat, or maybe they decide to begin trading stocks, publically. Should this occur, file an amended charter with the Secretary of State, after the board of directors votes on and agrees to the revisions.

Difference Between Corporate Charter and Bylaws

In addition to a corporate charter, it is best practice for a company to also create bylaws. While similar to a corporate charter in that the bylaws also state the purpose of the company, they spell it all out in more specificity. Additionally, bylaws not only list the name of the Board of Directors but also provides further information regarding how the board operates and the specific roles of each board member. The bylaws may also offer information regarding how the board meetings are conducted, such as the use of Roberts Rules of Order.

Things to Consider

There is a number of things to consider when creating the corporate charter or articles of incorporation for your company, including:

  • Does your state require the use of, “Inc.” or “Incorporated” in the name of your company?
  • What, if any, additional requirements does your state have regarding corporate charters?
  • Does your state require that your corporate charter be approved by the Secretary of State before you can begin operating your company? If so, what is the timeframe for that approval to take place?
  • Do you want to consult an attorney in guiding you in the creation of your corporate charter, or utilize the forms that many government websites provide?
  • Will your company have a designated registered agent? This is often used in situations where, for tax purposes, a business chooses to be incorporated in a state different from that in which the owners or founders live, although this is often required regardless. The registered agent acts as the decision-making body for the company.
  • Why was your company formed? This is another factor that is always required in a corporate charter or articles of incorporation.
  • Does your company sell stocks? If so, how many and what is the price of the stocks going to be when the company first goes public?
  • Is there another business in your state with the same name that you are trying to get incorporated? If so, the secretary of state will most likely not approve your corporate charter. Additionally, if there is another company with a same that is similar enough as to create confusion, as that may also serve as reason enough to not approve your corporate charter or articles of incorporation. Fortunately, most states make it easy enough to search, online, for business names that are already registered in your state, so that you hopefully do not end up in a situation where you are having to revise and then resubmit your corporate charter.

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