Starting a business is a giant step. Many individuals start their Texas company as a sole proprietorship or partnership due to the ease and low cost. However, depending on your business, those entities may not provide the protection or flexibility you need. We often work with clients in determining the best structure for their newly formed company.
According to the Corporate Finance Institute, corporations must file articles of incorporation with the Secretary of State where the company operates.
What are the articles of incorporation?
This set of documents, also known as a charter or certification of formation, document the legal creation of a corporation. These differ from articles of organization used by limited liability companies. While an LLC provides financial and legal protection similar to that of a corporation, it can hinder your company if you want outside investors.
What is the importance of articles of incorporation?
Unlike the bylaws, which are the rules and regulations by which the business operates, articles of incorporation establish and inform the state regarding critical aspects of the organization. They contain general information such as the company’s location and name as well as additional provisions, such as the following:
- Type of corporation
- Name and address of the registered agent
- Whether the corporation is stock or non-stock
- Purpose for which you formed the corporation
The articles of incorporation create the legal entity. It is entirely separate from you and others who run it. By forming a legal corporation, you have protection from the company’s creditors and can raise capital by selling stock. The business also becomes legally responsible if lawsuits arise. If you wish your business to flourish, having the appropriate entity and filing the right paperwork is essential.