Key Takeaways

  • A Certificate of Incorporation is a legal document that formally establishes a corporation as a separate legal entity.
  • It provides liability protection, credibility, and compliance with state requirements.
  • This certificate is required to open business bank accounts, secure funding, and engage in many legal and financial activities.
  • Filing involves submitting the necessary documentation to the state, along with any required fees.
  • Different states may have specific filing requirements, including the need for file-stamped vs. certified copies.
  • Maintaining compliance after incorporation requires ongoing actions like filing annual reports and paying required fees.

The importance of Certificate of Incorporation relates to the formation of a company or corporation. Filing this document protects you from business liabilities.

Why Incorporation Is Necessary

Any type of business needs to go through the process of incorporation. This process involves preparing specific documents, including the Articles of Incorporation, and filing documents with the secretary of state. For limited liability companies (LLCs), the main documents used to incorporate are the Articles of Organization.

There are many reasons why every business must incorporate. Incorporating:

  • Shields you from liability. If you operate an unincorporated business, creditors might reach your personal assets. Your personal residence and personal bank account might pay down debts or satisfy lawsuits against your business. When you incorporate, the business and all of its owners remain separate entities.
  • Establishes perpetual existence and transfer of ownership. Perpetual existence means the business remains unaffected by the withdrawal or death of one of the owners. Similarly, an unincorporated business is difficult to transfer ownership. If the business is incorporated, shareholders can transfer their interest by gift or sale.
  • Gains tax advantages. Incorporated business gain tax deductions for operating costs, which lower your company's tax liability. These deductions may include employee wages, insurance costs, retirement plan costs, and material/production costs.
  • Enhances the company's image. Incorporating your business adds credibility, particularly if your company has Incorporated, Company, or Limited (or any of its abbreviations) after its name. Customers are more likely to trust a business that has a positive image. It also makes the company more attractive to banks and investors if it needs outside financing.
  • Improves ability to manage. An incorporated business has shareholders involved with the board of directors. The board delegates the authority to the company's officers. An unincorporated business could have a co-owner or employee who holds all the power and decision-making authority. This lack of structure can adversely affect the company.

Certificates of Incorporation

A Certificate of Incorporation includes important information such as the registered company's name, address, and date of incorporation. It's important to have this document when you decide to open a business bank account or apply for any type of loan. You also need it if you want to sell your shares to investors.

What Information Does a Certificate of Incorporation Include?

A certificate of incorporation typically includes the following details:

  • Company Name: The legal name of the corporation, which must comply with state naming requirements.
  • Registered Agent Information: The individual or company designated to receive legal documents on behalf of the corporation.
  • Business Purpose: A general or specific description of the company’s intended activities.
  • Incorporator Details: The names and addresses of the incorporators who are responsible for executing and filing the document.
  • Stock Structure (if applicable): Information about authorized shares, share classes, and par value, if any.
  • Corporate Address: The principal business location or mailing address.

This information serves as the official record of your corporation’s formation and legal existence.

Important Documents Necessary for Forming Your Company

When it comes to forming your company, you must take note of important documents you need:

  • Certificate of Incorporation. This legal document is necessary when forming a company or corporation. The state government or non-governmental entity issues the license to form the corporation. It essentially serves as the birth certificate of your company.
  • Certificate of Commencement. The date of incorporation cannot be the same date of commencement of business (COB). Pertaining to the point of commencement, a public or private limited company that doesn't have shared capital does not need to comply with any other legal formalities. Companies commence business activities immediately after securing the Certificate of Incorporation. Public and private limited companies that share capital must obtain Certificate of Commencement of business before they can commence the business or borrow money.

How to File a Certificate of Incorporation

Filing a certificate of incorporation involves several key steps:

  1. Select Your State of Incorporation: Choose where your business will be incorporated, which may differ from where you operate.
  2. Prepare the Required Information: Gather the necessary company details, including name, registered agent, and share structure.
  3. Submit the Form to the Secretary of State: Complete the state-specific certificate of incorporation form and submit it either online or by mail.
  4. Pay the Required Filing Fees: Fees vary by state and may depend on the number of shares or the type of corporation.
  5. Obtain File-Stamped and Certified Copies: A file-stamped copy confirms submission, while a certified copy may be needed for legal or financial transactions.

It's important to verify specific state requirements, as some jurisdictions have unique filing rules or offer expedited processing for an additional fee.

Certificate of Incorporation and a Business Bank Account

When opening a business bank account, the Certificate of Incorporation is one of the most important documents you need to bring with you. This document shows that you have set up your business correctly. In addition, it shows that the business is a legal entity and is on the public register of companies.

Banks must comply with strict regulations and rules, particularly when it comes to money laundering. That's why you must bring identification with you as well as documents pertaining to your company's formation. Other important documents you must bring, including the Certificate of Incorporation, include the memorandum, Articles of Incorporation, and any issued share certificates.

File-Stamped vs. Certified Copies of a Certificate of Incorporation

When you file a certificate of incorporation, you may receive either:

  • File-Stamped Copy: A copy with a date and stamp from the Secretary of State indicating that your filing has been received and recorded.
  • Certified Copy: A document officially certified by the state that verifies its authenticity. This may be required for certain legal matters, such as foreign qualification (registering your corporation in another state) or securing funding from lenders and investors.

Understanding the difference ensures you have the proper documentation for your business needs.

Why Bylaws are Important for Your New Company

If you don't record your company bylaws, the secretary of state can fail your new business. Failing to have these bylaws shows that the Articles of Incorporation are more important than company bylaws. Every business is different, so you must address its needs in the bylaws. You can use a generic bylaws template to create them.

What Happens After You Receive a Certificate of Incorporation?

After obtaining your certificate of incorporation, several steps remain to ensure your corporation is fully operational and compliant:

  • Adopt Corporate Bylaws: Outline internal governance rules, including officer duties, meeting protocols, and shareholder rights.
  • Appoint Directors and Officers: Formally elect your board of directors and designate corporate officers.
  • Issue Stock Certificates (if applicable): Document shareholder ownership with stock certificates and maintain a stock ledger.
  • Obtain an EIN (Employer Identification Number): Required for tax filings, hiring employees, and opening business bank accounts.
  • File Initial Reports or Statements: Some states require an initial report or statement of information shortly after incorporation.
  • Maintain Ongoing Compliance: Keep up with annual reports, franchise taxes, and other state-specific requirements to maintain good standing.

Frequently Asked Questions

  1. What is the purpose of a certificate of incorporation?
    A certificate of incorporation serves as the official legal document that establishes a corporation as a separate entity, providing liability protection and formal recognition.
  2. How long does it take to receive a certificate of incorporation?
    The processing time varies by state and may take from a few business days to several weeks. Many states offer expedited filing for an additional fee.
  3. Do all businesses need a certificate of incorporation?
    Only corporations need a certificate of incorporation. LLCs and sole proprietorships follow different registration processes.
  4. What’s the difference between articles of incorporation and a certificate of incorporation?
    These terms are often used interchangeably, though some states distinguish between the document you submit (articles) and the document you receive (certificate) as proof of formation.
  5. Can I change the information on my certificate of incorporation later?
    Yes, most states allow corporations to amend their certificate of incorporation by filing an amendment form and paying applicable fees.

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