Understanding your certificate of incorporation

Once you've decided to organize your company as a corporation, you need to prepare and file a certificate of incorporation. This document is required in order to have your corporation recognized by the state and to secure the advantages of being incorporated.

Registering a corporation

To legally incorporate in any state, a business must officially register by filing a document containing basic information about the corporation. While most states call this document articles of incorporation, some, including Delaware and New York, refer to it as a certificate of incorporation. Although the title of the document may vary, the content of the document is generally the same.

The document must contain the information that is required by the corporation laws of the state where the business is incorporated.

These requirements may be obtained from the state agency that regulates corporations, whose name varies from state to state. In many states it is the Secretary of State, but others call it the Corporations Division, Department of Commerce, or Corporation Commission.

Content of the certificate of incorporation

The exact requirements for a certificate of incorporation are specified by state law. However, the document often includes the following information:

• The name of the corporation. This requires some advance research to determine whether the business name you wish to use is available.
• The purpose of the corporation. In most states, you can state a general purpose so that you won't be limited if the business expands. For example, it is typical for the purpose to be stated as "any lawful act or activity for which a corporation may be organized."
• Legal addresses. This includes the main office address as well as that of the corporation's registered agent.
• The duration of the corporation. In most cases, the corporation is designated as existing perpetually—that is, without any expiration date. However, sometimes a corporation is formed for a limited amount of time in order complete a specific project.
• The number and types of shares of stock that the corporation is authorized to issue. Authorizing too few shares will require a vote of shareholders in the future if it is determined that more shares are needed to raise additional funds. On the other hand, authorizing too many may result in higher filing fees and taxes.
• The name, address, and signature of one or more incorporators. This is generally the person who files the certificate of incorporation. Any adult may be an incorporator. This may, but need not, be an officer, director, or shareholder of the company. When an attorney is hired to prepare and file the certificate, the attorney is often the incorporator.

Some states also require the certificate to list the names and addresses of the initial board of directors. The content of the certificate may vary, depending upon whether you a forming a for-profit or a nonprofit corporation.

Before filing the certificate of incorporation, you need to be sure that the document is accurate. If you make a mistake, it can cost additional fees to file an amended or restated document.

Creating a certificate of incorporation

Your state's agency may have a standard template for a certificate of incorporation, which will outline all of the required information. This form may be available from the agency's website, local office, or by mail. By using your state's official template, you will be sure that your certificate complies with your state's laws. Your state agency's website may even allow you to fill out the template and file it online.

You may want to consider consulting a lawyer or tax professional to either prepare your certificate or review it if you've prepared it yourself, if one or more of the following apply:

• You think you need to state a detailed purpose for the corporation.
• You will be issuing various types of shares of stock or authorizing a large number of shares.
• If, for any reason, you just don't feel comfortable with preparing your own certificate from a template.

In most cases, preparing a certificate of incorporation from a standard form works just fine. Doing so also helps to reduce the costs of incorporating by not having to pay an attorney for this task.