You must file articles of incorporation (sometimes called a "certificate of incorporation" or "charter") with your state (usually with the Secretary of State) and pay a filing fee in order to form a corporation. The filing fee generally ranges between $70 and $200 depending on the state, but certain states have higher fees -- for example, Massachusetts ($275) and Texas ($300). See the state pages on forming a corporation for details on state filing fees.
The articles function like the constitution for the corporation. Ordinarily, the document is short and simple, and you can prepare your own in a few minutes by filling in the form provided by your state's filing office, or by drafting your own based on a sample. Generally, all those people who will be initial shareholders may prepare and sign the articles, or they can appoint one person to do so. Each state has its own required version of this document, so the precise requirements may vary. Below is a list of information commonly required by the states:
- Company Name: You must include the name of the corporation, which typically must include "Corporation," "Incorporated," "Company," "Limited," or an abbreviation of one of these words, such as “Inc.” or "Corp." Most states will not allow two companies to have the same name, nor will they allow your corporation to adopt a name that is deceptively similar to another company's name. For more on naming requirements, see the state pages on forming a corporation.
- Name and Address of Registered Agent: Most states require the name and address (not a P.O. Box) of the corporation's registered agent in the state of incorporation. The purpose of the registered agent is to provide a legal address for service of process in the event of a lawsuit. The registered agent is also where the state government sends official documents required each year for tax and legal purposes, such as franchise tax notices and annual reports. If your corporation incorporates in the same state where you do business, an officer of the corporation can usually serve as the registered agent. If your corporation incorporates in a state other than where it does business, then you will have to hire a registered agent in the state of incorporation. You can find and hire registered agent service companies online, and frequently they can answer questions and provide other assistance with the formation process.
- Legal Address of the Company: Some states require that you include the address of the corporation's principal office (whether or not that address is inside or outside the state of incorporation). This is distinct from the address of the registered agent discussed above, although in some circumstances this address could be the same (i.e., when a corporate officer is serving as the registered agent).
- Incorporator(s): An incorporator is the person preparing and filing the formation documents with the state. Most states require the name and signature of the incorporator or incorporators to be included in the articles of incorporation. Some states also require that you include the incorporator’s address.
- Director(s): Some states require that you list the names and addresses of the initial directors of the corporation in the articles. If the corporation will have only one shareholder, that shareholder may also serve as the sole director. When there will be more than one shareholder, the number of required directors differs from state to state, and some require more than one director. See the state pages for details on the number of directors required by the fifteen most populous states and the District of Columbia.
In other states, you are not required to identify the initial directors in the articles of incorporation (although you may do so if you want). When the initial directors are not named in the articles, the incorporator or incorporators have the authority to manage the affairs of the corporation until directors are elected. In this capacity, they may do whatever is necessary to complete the organization of the corporation, including calling an organizational meeting for adopting bylaws and electing directors.
- Business Purpose: Virtually all states require a statement about the corporation's "business purpose." Most states allow a general clause stating that the company is formed to engage in "all lawful business." It is a good idea where permitted to use this general language to avoid constraining your business activities in the future should the business move in unanticipated directions.
- Number of Authorized Shares of Stock: You generally must state in the articles how many shares of stock the corporation is authorized to issue. Stock is a representation of ownership of the corporation, and this ownership is divisible based on the number of shares that the corporation issues. For instance, say the corporation issues 100 shares -- if you own all 100 shares, then you own the entire company. If you own 50 shares, then you own half of the company, and the remaining 50 shares (and 50% ownership interest) can be divided up among other people (in return for capital contributions, services, as a gift). Unless shares of stock are designated as non-voting stock, shares give their owner the ability to vote for the election of directors in proportion with their ownership interest. (So, if you own 100% of the stock, you get to elect the directors yourself; if you own 75% of the stock, you get 75% of the say in who is elected; and so on).
It is important to keep in mind that, in the articles of incorporation, you designate the number of shares the corporation is authorized to issue -- the corporation is not required to issue all of those shares right away (or ever). It is common practice for corporations to hold on to authorized but non-issued shares in order to add additional owners later or to increase the ownership interest of a current shareholder. In the articles, it is generally a good idea to authorize a large number of shares (several thousand), keeping in mind that the number of authorized shares may be tied to the corporation's state franchise tax liability. For instance, in Delaware, it is a good idea for new corporations to authorize 3000 shares, because this is the maximum number of shares that a corporation can authorize and still qualify for the minimum $35.00 annual franchise tax.
- Par Value: Some states require that the articles state the "par value" of the authorized shares. The par value is the share's minimum stated value -- meaning that a share cannot be sold for less than its par value. Par value of a share is not the same thing as its actual value, and the board of directors has discretion to set the price to be received for stock issued by the corporation without regard to par value (so long as that value is larger than par value, which it always is). Most companies set par value at $0.01 or $1 or no par (some states requiring a designation of par value will accept "no par").
- Preferred Shares: If you plan to authorize preferred shares of stock in addition to common stock, you must include information about the preferred shares, along with information about the voting rights of the respective classes of stock. Preferred shares typically provide for preferential payments of dividends or distribution of assets upon termination of the business. Small business owners often avoid this legal complexity by choosing to authorize only common stock. This approach is simpler and meets the capitalization needs of most small businesses. If you plan on creating preferred shares, you should consult with an attorney before drafting your articles of incorporation.
You can find the required forms and sample articles of incorporation for the fifteen most populous U.S. states and the District of Columbia in the state pages on forming a corporation.
If you want to amend the articles, you can do so by filing articles of amendment with the same official to whom you submitted the original articles. There is usually a prepared form for doing this.