Key Takeaways

  • A business charter (or corporate charter) is a foundational legal document that officially establishes a corporation and defines its mission, governance, and operational structure.
  • It must be filed with the Secretary of State in the state of incorporation and often includes details like company name, purpose, board of directors, and stock structure.
  • A corporate charter differs from bylaws, which govern internal operations and board procedures.
  • Businesses should carefully draft their charter to align with long-term goals, legal requirements, and stakeholder expectations.
  • Charters can be amended to reflect changes in the company’s purpose, structure, or capital structure over time.
  • Strong charters help companies define roles, decision-making authority, and legal protections for shareholders and directors.

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.

Key Elements of a Business Charter

A well-drafted business charter is more than a legal requirement — it’s a strategic blueprint that guides how a company operates and grows. While state laws dictate some of the required information, most charters contain the following essential components:

  1. Company Name and Address – The legal name and principal office location. Many states require the use of "Inc." or "Incorporated" in the name.
  2. Corporate Purpose – A statement describing the company’s mission, business activities, and the industry it will operate in.
  3. Registered Agent – The individual or entity authorized to receive legal documents on behalf of the company.
  4. Board of Directors – Names and roles of the initial directors who will oversee governance.
  5. Share Structure – The number and types of shares the company is authorized to issue, along with their rights and restrictions.
  6. Duration – Whether the company is established in perpetuity or for a limited duration.
  7. Incorporator Information – The name and contact details of the person responsible for filing the charter.

These elements form the foundation of your corporate identity and must comply with your state’s business formation laws.

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.

How to Draft an Effective Business Charter

Drafting a strong business charter requires more than filling out a form — it’s an opportunity to define your company’s vision, governance model, and legal protections. Here are best practices to follow:

  • Clarify Your Purpose: Clearly define your mission and objectives. A vague or overly broad purpose can create compliance issues or confuse investors.
  • Plan Governance Carefully: Outline the structure and powers of your board of directors, as well as any shareholder voting rights.
  • Anticipate Future Growth: Consider how your company might evolve — for example, whether you plan to issue more shares, bring on new investors, or expand into new markets.
  • Include Protective Clauses: Many businesses add indemnification clauses, limitation of liability provisions, and director protections to reduce legal risks.
  • Ensure Regulatory Compliance: Each state has unique requirements. Missing information or errors can delay approval or invalidate your filing.
  • Review and Amend as Needed: As your business grows, your charter should evolve. Regular reviews help ensure it still aligns with your company’s goals and legal obligations.

Business Charter vs. Operating Agreement vs. Bylaws

While a business charter is foundational, it’s often confused with other key documents:

  • Business Charter (Articles of Incorporation): Establishes the corporation’s existence and legal identity.
  • Bylaws: Internal rules governing meetings, elections, board roles, and other operational details.
  • Operating Agreement (for LLCs): Outlines the ownership structure and management responsibilities for limited liability companies.

Understanding these distinctions ensures your business is structured correctly and legally protected from the start.

Benefits of a Strong Business Charter

An effective business charter offers several strategic and legal advantages:

  • Legal Recognition: It grants your business legal status as a corporation, allowing it to enter contracts, own property, and sue or be sued.
  • Governance Clarity: Clearly defines leadership roles, decision-making authority, and shareholder rights.
  • Investor Confidence: Investors are more likely to fund companies with clear governance structures and transparent objectives.
  • Credibility and Trust: A formalized charter builds trust with partners, clients, and regulators.
  • Flexibility and Adaptability: Provides a legal framework that can be updated as the company grows or pivots its mission.

Frequently Asked Questions

  1. What is a business charter and why is it important?
    A business charter is a legal document filed with the state that establishes a corporation’s existence. It outlines the company’s purpose, governance, and structure, serving as the foundation for operations and legal recognition.
  2. Is a business charter the same as bylaws?
    No. The charter establishes the corporation’s legal identity, while bylaws govern how the corporation is run internally — such as meeting procedures and director responsibilities.
  3. Can a business charter be amended?
    Yes. Companies can file amendments with the Secretary of State to reflect changes such as a new business purpose, additional share classes, or updated board members.
  4. Do LLCs need a business charter?
    LLCs typically file articles of organization, not a charter. However, the purpose is similar — to legally establish the entity and define its structure.
  5. How long does it take to get a business charter approved?
    Approval times vary by state but generally range from a few days to several weeks, depending on the state’s processing time and whether expedited service is requested.

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