Articles of Incorporation make up a document you file with a state when you start a business. It legally establishes the business and is required by statute. You don’t need Articles of Incorporation if you’re forming a Limited Liability Company (LLC). Instead, you would need articles of organization. You don’t need either type of articles if you’re a sole proprietorship or a general partnership. If you’re incorporating a business on the other hand, then by law you must file Articles of Incorporation. There are at least 3 reasons to customize Articles of Incorporation, like attracting investors with different types of stock options.
You can’t afford to take the Articles of Incorporation lightly. Too many business owners file the bare minimum to get their corporation started only to suffer later because they didn’t take the time and energy up front to fully explain how they really want to business to run. We get it. Sometimes a business owner simply doesn’t have time to properly draft the articles. Other times they just didn’t know the importance of careful drafting. Or even what their options are or how to draft effective articles. Here are 5 reasons why you need detailed Articles of Incorporation.
1. One size does not fit all
Every business is unique and should have unique agreements and contracts—including Articles of Incorporation. Yes, Articles of Incorporation are technically a contract. It is a contract between the corporation and the shareholders of the corporation. It is also a contract between the corporation and the state. As a contract, it should be carefully written to carry out the wishes of owners (shareholders).
2. You can create more than one type of stock
Stock, or the capital structure of the company, is one of the most important parts of the Articles of Incorporation. If you file the bare bones form that the Secretary of State provides, then you will be limited to offering only common stock. If you hire an attorney to draft detailed Articles of Incorporation, you can offer preferred stock, too. Many investors require preferred stock because it carries the lowest risk.
3. They’re tax deductible
When you pay an attorney to give you advice on starting your business and to draft Articles of Incorporation, those fees are likely a tax-deductible business expense. Read more about other tax deductible services.
Too late? Don’t worry. We can fix your current Articles of Incorporation.
If you already filed the bare minimum just to get your company up and going, that’s okay. The secretary of state allows you the opportunity to go back and specify the structure you really want the company to have. This is done by filing Articles of Amendment. A business attorney can fully explain you’re your options, what they mean, and how to file an amendment. If you like, the Attorney Francis Boyer can do the entire process for you, including filing the Articles of Incorporation or Articles of Amendment himself.