What is a Certificate of Incorporation?

By Fernando Berrocal





When forming a startup, business owners must file a "certificate of incorporation" (also known as "articles of incorporation") with the state to register their startup. What precisely is a certificate of incorporation? It is a legal document that serves as a formal record of the formation of a business.


Who Needs to Submit an Incorporation Certificate?


Entrepreneurs who want to run their business as a corporation—a legal entity separate from its owners that protects them from personal liability—must obtain a certificate of incorporation form.


Before they may undertake specific operations in the startup name, they must get their certificate of incorporation authorized by the state (typically the Secretary of State Office). Here are a few examples: Create a business bank account, apply for business licenses and permits, hire employees, and file taxes.


When Is the Best Time to Start a Startup?


As previously stated, a business's certificate of incorporation is required to do some important operations under its name. So, after startup owners have decided to operate their business as a corporation, conducted a corporate name and trademark search to ensure that the name they want to use is available, and secured a registered agent, a good time to file the certificate of incorporation paperwork is generally after they have decided to operate it as a corporation.



What is a Certificate of Incorporation

 

 

Perhaps you're wondering when the best time is to start integrating, that’s debatable. The paperwork can be submitted at any time by the startup owner. If you want to start your business as soon as possible, you'll need to know how long the state will take to complete your request. Most state websites give an estimate of how long you might have to wait. Existing businesses that desire to convert to a corporation from another form might consider doing so on January 1 of the following year. This enables for a seamless transition from operating as one structure last year to functioning as a corporation the next year, avoiding the need to submit two sets of tax forms, as would be the case if the move occurred in the middle of the year.


What Information Is Included in a Certificate of Incorporation?


From one state to the next, the information needed on the certificate of incorporation form may differ significantly. Below are some of the details you may be required to provide:


  • The type of organization that is being formed. Here are a few examples: Stock in a business, non-stock business, close of business according to the law, benefit, cooperative, management, professional, nonprofit, management, etc.
  • The name of the corporation must have a corporate ending like "Corporation," "Incorporated," or "Company" (or an abbreviation of them like "Inc.," "Corp.," or "Co.," etc.).
  • Within the state of registration, the address of the startup's office.
  • The name and the location of the startup's registered agent.
  • If the startup is established as a stock corporation, the total number of authorized shares.
  • Each incorporator's name and address.
  • Each member of the initial board of directors' name and address.
  • A future start date has been requested (if any).
  • The business's purpose.
  • Whether or whether the organization is cooperative.


What is the cost of obtaining a “Certificate of Incorporation”?


The fees to file for a certificate of incorporation vary, just as the information a state wants may differ from what another state wants.  The filing fee may be a fixed charge that applies to all businesses, or it may be based on the number of authorized shares the startup will have, or it may be a combination of both.


It's important to remember that the certificate of the incorporation filing fee is just one of the expenditures that entrepreneurs must consider when starting a startup. Fees for other legal and government files might include:


  • State franchise tax - For the right of conducting a startup in the state as a business.
  • Licenses and permissions for businesses - Depending on the type of business and its location.
  • Attorney's fees - For legal advice and document processing.


Which State is the Best for Starting a Startup?


This is a difficult question to answer! People usually prefer to incorporate in their native state, although this isn't always the case. Some startup owners want to incorporate in a different state because they believe it will provide them with financial and legal benefits.

The state in which a startup is formed might have an impact on how much it costs for initial filings and continuing compliance. It will affect the country's tax burden (different states have different state tax rates). It will also affect its legal obligations and vulnerabilities. These are major concerns, and I recommend consulting with an attorney and an accountant (or tax adviser) for professional advice to assist you to make an informed decision.


Do You Need a Lawyer to File a Certificate of Incorporation?


Attorneys are one of the most useful resources available to startup owners. Lawyers may assist businesses in determining which legal structure (LLC, corporation, etc.) will benefit them the most by sharing their knowledge of the legal pros and cons of various business entity forms. Lawyers can also assist startups to stay in good standing with the state and prevent legal troubles by providing advice on a variety of other critical legal matters.


What is a Certificate of Incorporation

 

Attorneys frequently create and file business registration documents for their clients in addition to providing guidance. Entrepreneurs, on the other hand, are not required to hire an attorney to file their startup formation and compliance documents. In fact, by picking an alternative, they may be able to save a significant amount of money.

Do it on your own


Owners of small businesses can create and submit their documentation. This is the most cost-effective option—at least on the surface! It's a fantastic choice for businesses that are confident in their ability to complete and file documents correctly. However, if they make mistakes or miss deadlines, the state may reject their application, delaying their incorporation and increasing their filing expenses. Another alternative is to hire an online document filing service to take care of the filings.


Last Thoughts on Incorporation


One of the numerous procedures required in forming a business is filing the certificate of incorporation documentation. Research the regulations in your state and get advice from legal and financial specialists to ensure you have a clear understanding of all you need to know.


After learning about the certificate of Incorporation and everything related to it. Are you ready to bring your startup to the next level? Apply to MassLight’s next batch. MassLight supplies capital and a dedicated tech team. We take equity in return. Have questions? Refer to our FAQ page.


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