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3 Answers Needed to Complete Your Articles of Incorporation

3 Answers Needed to Complete Your Articles of Incorporation

Every state has its own requirements for the Articles of Incorporation. The amount of information that must be disclosed varies from minimal in many states that are considered pro-business, such as Delaware, to more extensive in other states. However, every state demands that you supply three basic facts about your business: its corporate name, its registered agent and the number of authorized shares.

  • Corporate Name. As far as the state of incorporation is concerned, your corporate name must meet two requirements. It must be unique and it must be allowable. The test for determining whether a name is unique varies by state.  However, "unique" generally means that you cannot use a name unless it is distinguishable from the names of other domestic or foreign corporations (and in some states other entity types such as limited liability companies) that are on file with the secretary of state. An "allowable" name is one that meets the state naming requirements. States vary, but nearly all require corporations to label themselves as such by using a designator such as "Inc.", “Corporation”, or "Company." Many states prohibit the use of certain terms, like "Bank" for businesses that are not banks. However, when you select your business name, you should consider far more than the minimum state requirements, as we discuss in our articles "Three Questions to Answer Before Naming Your Business" and "3 Tips for Naming Your Business".
     
  • Registered agent. All states require that you appoint (and then continually maintain) a Registered Agent, although some may use a different term such as resident agent or agent for service of process.  The registered agent’s address is called the registered office. The registered agent acts as the hands and feet of your corporation. Your registered agent receives service of process for lawsuits and official state documents (such as the corporation’s annual report). The registered agent then delivers those documents to the appropriate people within the corporation. The corporation laws generally say that any natural person who is a state resident or any domestic or foreign corporation (other than the one being incorporated) can serve as a registered agent. But, because the papers delivered to the registered agent are critical to the corporation's well-being, you don't want "just anybody." You want your registered agent to be knowledgeable, experienced and reliable. The registered agent also needs to be available during working hours throughout the year. For these and other reasons, it makes sense to use a professional registered agent provider, such as CT.
      
  • Authorized Shares. Every state will require that you indicate how many shares of stock the corporation will be authorized to issue. If there is more than one class of shares authorized, the states ask for the number of shares in each class and the descriptions of the rights granted each class (e.g., preferred versus common, voting versus non-voting). It is usually worth having a conversation with your attorney or accountant before deciding upon the number of shares and classes to authorize. Although the goal is to determine the initial number of authorized shares, the discussion involves your expectations for the company's future growth and ownership structure, as well as the tax advantages involved in different classes of shares. Why? Because setting the number too low may mean you will need to file articles of amendment down the road when you want to bring in new shareholders. On the other hand, setting the number too high might have ramifications for franchise tax or other annual fees. And, establishing classes of shares (other than voting and non-voting) will destroy the option of making an S Corporation election to take advantage of pass-through taxation. 

All states require the three pieces of information discussed above, but many states require additional information. Information that may be required includes:

  • the names and addresses of each incorporator (this is often required)
  • the corporation's purposes
  • the names and number of initial directors
  • the registered agent’s consent to act as such

If you have questions about what is required to incorporate in the state of your choice, CT's incorporation specialists are a resource to help with the process.

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