What is the Certificate of Incorporation?
A certificate of incorporation is a document issued by a state or federal government that establishes the legal status of your business. A certificate of incorporation document is required in order to operate in most states and countries.
The CoI (Certificate of Incorporation) is proof that the business is valid, that they are legally licensed to do business and that they are registered with the state. It confirms the name of the business, the business' address, the registered agent for the business, the business' fiscal year, and information about the owners of the business. A certificate of incorporation also protects the company owners' personal liability for the corporation's debts.
Corporations are deemed "persons" by the U.S. Supreme Court, which means that they have rights and obligations under the law. A corporation has the same constitutional rights as a natural person. The Certificate of Incorporation provides these rights to the company, including the ability to accept contracts, leases, mortgages, liens, to sue or be sued in its own name, to buy or sell property, to buy or sell stock in the company, to create a bank account, etc.
What is the purpose of a Certificate of Incorporation document?
In order to create a legal entity for a business, founders and entrepreneurs must file a certificate of incorporation. Business activities can only be conducted under a company's name if it has an incorporation certificate.
In addition to this, a certificate of incorporation is a requirement for business permits and licenses, filing taxes, hiring employees, seeking funding or opening a corporate bank account.
Each state has its own fee for filing a certificate of incorporation. Fees typically range from $50 to $300, and overall, states charge about $150 on average.
What does a Certificate of Incorporation contain?
While every state has its own certificate of incorporation, the document is very similar in many countries and contains the following terms:
- Corporation's legal name
- Corporation's registered office
- Business code
- The Purpose of the Company
- Type of corporation
- Incorporator's name and address
- Registered agent's name and address
- Board of directors' names and addresses
- Share capital
- Filing date
Corporation's legal name
Prior to selecting a company name, you should perform some prior research to ensure that the name you intend to use is available. Ideally, the name should be clearly distinct from those of existing businesses in the state. Companies should also add a suffix such as "Inc.", “Corp.” or "Ltd." as an identifier to show that the entity is a company.
The Purpose of the Company
The purpose section describes the type of business you intend to run. There are some states that accept very broad purposes, such as consulting, while others require more specificity. A general statement of purpose gives you greater flexibility if you decide to pivot or diversify your business in the future.
Share Capital
The certificate of incorporation specifies the types and amounts of shares that constitute a company's capital. Typically, a company's share capital consists of both common and preferred shares. Even though the company may or may not issue shares, they can be found in the certificate of incorporation. Shares can be issued whenever necessary.
The form developed by the Department of State in the US contains an authorized stock structure of 200 shares without a par value. Most corporations are formed with 200 shares and this does not need to be changed unless there is a modification in the stock structure.
Organization of the Company
A company's article of incorporation specifies the name and address of the registered agent who will receive legal correspondence on its behalf. The section also includes the addresses of the directors, as well as the office address. It may also include auditors and legal advisors depending on the state and type of business.
Filer (Incorporator's name and address)
The person filing the Certificate of Incorporation should provide their name and address. An official filing receipt will then be issued to the filer. It includes the date of filing, the name of the corporation, details of the Certificate of Incorporation, and an accounting of fees paid.
Articles of Incorporation vs Certificate of Incorporation
There is no difference between a Certificate of Incorporation and an Articles of Incorporation. In some states, Articles of Incorporation are known as Certificate of Incorporation or Statement of Incorporation so they essentially are the same thing.
Both articles of incorporation and certificate of incorporation are documents that state the purpose of a company and establish the legal status of a business. Articles of incorporation are a set of formal documents filed with a government body to legally establish a company.
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