What Is Place of Incorporation? Everything You Need to Know
What is place of incorporation? The place of incorporation is the principal address of the corporation in the state where it's incorporated.3 min read
What is place of incorporation? The place of incorporation is the principal address of the corporation in the state where it's incorporated.
A corporation is a legal entity created by a charter (e.g., the articles of incorporation). The place of incorporation can be found in the articles. It's the principal place from where the corporation conducts its business. The articles of incorporation also contain the names and signatures of the incorporators.
What Is a Corporation?
- A corporation is a legal business entity created under a state statute.
- It can own property, enter into contracts, and participate in lawsuits all in its own name.
- A corporation can exist even without any director or shareholder.
- Although most of the corporations have perpetual existence, a corporation can also be formed for a certain period.
Principal Place of Business
Principal place of business is the central place from where a corporation operates its business. In addition to the principal place, a corporation can also conduct business in other states.
A corporation must be registered in the state where it's incorporated. The articles of incorporation must mention the address of the main office.
While it may be fairly easy to determine the principal place of business of some corporations, the determination may often be difficult and ambiguous for large corporations having multiple locations. For example, if a corporation's headquarters is located in San Francisco, whereas its factories are located in Pittsburgh, it may not be obvious which place should be considered as its principal place of business. However, in most of the states, a corporation must select its corporate headquarters as the principal place of business. This address must be filed with the secretary of state.
The state of incorporation is referred to as the domestic state, while all the other states are called foreign states. For example, if you are incorporated in San Francisco, that would be your principal place of business. If you also have an office in Louisiana, that would be a foreign state.
You should never file the formation documents (articles of incorporation or articles of organization) in other states, since that would result in creating multiple companies with the same name. Instead, you should only go on record in the other state.
If a corporation has multiple locations in the state of incorporation, you should look at where the decision-making power (the nerve center) lies. The location from where the day-to-day operations are conducted would be similar to the muscle center; it should not be mistaken as the principal place of business. This method of determining the principal place of business is referred to as total activities test.
A corporation can have only one principal place of business. You must have your business registered at this place. Failure to do so can subject you to penal action, which varies from state to state.
Purpose of Principal Place of Business
The main purpose of having a principal place of business is to let all the concerned parties know its location. For example, if someone wants to take legal action against the corporation, he or she can serve notice at the address mentioned in the charter document. Also, in the event of a corporation filing for bankruptcy, you can find the bankruptcy court's address at the place of incorporation. You can also use the place of incorporation for service of process.
The Charter or the Articles of Incorporation
- The charter or the articles of incorporation document is like a birth certificate; it establishes the legal existence of a corporation.
- A corporation charter is a public document.
- It includes the name, address, duration, purpose, and structure of the corporation.
- The charter may also include corporate bylaws, procedure for transfer of shares, and other provisions.
Who Are the Incorporators?
- The incorporators prepare and file the corporate charter.
- The charter includes the names and signatures of the incorporators.
- However, the inclusion of names does not make the incorporators liable.
- Since the shareholders are the real owners of a corporation, they can be held responsible for the corporation's activities.
How to Reincorporate Your Business
If you want to move your corporation's place of incorporation to another state, you must first dissolve the corporation and reincorporate it in the new state. The new corporation will be a separate legal entity, despite having the old name and owners. However, you may be required to get a new employer ID. Moving to a different state may also result in a different tax treatment.
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