If you’re thinking about starting a business, you’ll want to research which business entity type will be most advantageous to you. As you go through that process, you will discover that various documents and filings need to be submitted to the state to form a limited liability company (LLC) or corporation. Articles of incorporation and articles of organization are among them.
Articles of Incorporation
An articles of incorporation (sometimes called a “certificate of incorporation”) is a form that states require to set up a corporation (C Corporation). When a company’s articles of incorporation are approved, the business becomes a separate legal and tax-paying entity from its owners (known as “shareholders”). Because the business is an independent entity, its incorporators and shareholders, under most circumstances, cannot be held liable personally for the company’s legal and financial problems. As a corporation, a business must file a corporate income tax return and pay taxes at the corporate income tax rate.
The information requested on articles of incorporation varies from state to state. I’ve listed some of the possible details below:
- Corporation’s name
- Address of the corporation’s principal office
- Name and address of the corporation’s registered agent
- Business purpose
- Whether the corporation is organized on a stock or non-stock basis
- If stock basis: the initial classes of stock, number of authorized shares, and par values of shares
- Name and address of each incorporator
- Name and address of each member of the initial board of directors
- Effective date requested
- Duration of the corporation (Sometimes people form a corporation for a distinct purpose and limited time.)
- Additional provisions
Articles of Organization
An articles of organization (sometimes referred to as “certificate of organization”) is the document states require to form a limited liability company. An LLC is a separate legal entity from its owners (called “members”). Therefore, if someone sues the LLC or the company can’t pay its debts, the owners’ personal assets are not at risk (unless the owner has acted negligently, recklessly, or fraudulently to cause harm). While separate legally, LLC members and the business are considered the same tax-paying entity. Business profits and losses pass through to the owners’ personal income tax returns. In addition to income tax, all profits are also subject to self-employment taxes (Medicare and Social Security).
Alternately, an LLC (if it meets the IRS’s eligibility requirements) may choose to be taxed as an S Corporation. The S Corp election provides for pass-through taxation, but only members’ wages and salaries from the LLC are subject to self-employment taxes (their income received as profit distributions are not).
The details requested on articles of organization vary by state. Here’s a general list of what they might include:
- LLC Name
- Statement of Purpose
- Physical address of the LLC’s principal place of business
- Mailing address
- LLC’s management structure (i.e., member-managed or manager-managed)
- Registered agent’s name and address
- LLC’s organizers’ names (and managers if applicable)
- Effective date requested
- Duration of the LLC – (Sometimes people establish an LLC for a distinct purpose and limited time.)
Other Requirements for Starting a Business
Filing articles of incorporation or articles of organization is just one of several tasks business owners must tackle to establish a company as a corporation or LLC. Other common requirements include:
Corporation
- Designating a registered agent
- Filing an initial report
- Obtaining an EIN (Federal Tax ID Number)
- Opening a business bank account
- Applying for business licenses and permits
- Establishing bylaws
- Appointing a board of directors
- Issuing stock certificates
Limited Liability Company
- Designating a registered agent
- Filing an initial report
- Obtaining an EIN
- Opening a business bank account
- Applying for business licenses and permits
- Creating an LLC Operating Agreement
The requirements are different from one state to the next—and even by the local jurisdiction. I encourage you to check with your state and local government authorities (most have a lot of helpful information on their websites) about their rules. Also, get guidance from an attorney and accountant (or tax advisor) to make sure you understand your obligations.
Get Started with CorpNet’s Help
Contact CorpNet for help preparing and filing your articles of incorporation or articles of organization. My experienced team of filing experts has helped tens of thousands of entrepreneurs across the United States start their LLCs and corporations. No matter where you are in the U.S., we can assist you in registering your business and taking care of the other essential startup and ongoing compliance tasks you need to check off your list.
