What is a Certificate of Incorporation?

Who Needs to Submit a Certificate of Incorporation?

Entrepreneurs who want to operate their company as a corporation must file a Certificate of Incorporation form.

They must have their Certificate of Incorporation approved by the state (usually the Secretary of State Office) before they can conduct certain activities in the business name. Some examples include:

• Open a corporate bank account
• Apply for business licenses and permits
• Hire employees
• File taxes

When Is the Best Time to File?

As I mentioned, a business will need its Certificate of Incorporation to carry out some key activities under its business name. So a good time to file a Certificate of Incorporation paperwork is generally after business owners have decided that they want to operate their company as a corporation, after they have conducted corporate name and trademark searches to make sure that the name they want to use is available, and after they have secured a registered agent.

Perhaps you’re wondering what time of year is ideal for incorporating. That depends. Business owners can submit the paperwork at any time. If launching the business as soon as possible is the goal, it’s important to know how long it might take the state to process the request. Most state websites provide an estimate of how long the wait might be. Existing businesses that want to switch from some other structure to a corporation might consider making the change effective on January 1 of the new year. That allows for a clean break from operating as one structure in the past year to operating as a corporation in the next year, thus eliminating the need to file two sets of tax forms as would happen with a mid-year switch.

What Information is Needed to File?

The information requested on the Certificate of Incorporation form may vary slightly from one state to the next. I’ve listed some of the details you might be expected to share below:

• Type of corporation being registered – Some examples include business stock, business nonstock, business-statutory close, management, professional, insurance, nonprofit, benefit, and cooperatives.
• Name of the corporation – The name must include a corporate ending such as Corporation, Incorporated, Company, or an abbreviation of them such as Inc., Corp., or Co., etc.
• Address of the corporation’s office within the state of registration
• Name of the corporation’s registered agent and location
• Whether the corporation is organized on a stock basis; if so, the aggregate number of authorized shares
• Name and address of each incorporator
• Name and address of each member of the initial board of directors
• Future effective date requested (if any)
• Purpose of the business
• Whether the corporation is a cooperative.
• Whether the corporation is being formed as a benefit organization, and if so, how it benefits the public.
• Additional provisions

How Much Does it Cost to File?

Just as the information a state requires may be different from what another state asks for, the fees to file for a Certificate of Incorporation can vary, too. The filing fee might be a flat fee that applies to all corporations, or it might depend on the number of authorized shares the corporation will have or a combination of the two. To find out what the fee in your state is, I suggest visiting your state’s Secretary of State Office website to find that information.

Note that the filing fee is just one of the costs entrepreneurs must plan for when forming a corporation. Other legal and government filing fees might include:

• State franchise tax – For the privilege of doing business as a corporation in the state.
• Business licenses and permits – Depending on the type of business and where it’s located.
• Attorney’s fees – For legal guidance and handling legal documents.

Which is the Best State for Incorporation?

This is a tricky question! Usually, people choose to incorporate their businesses in their home state, but this isn’t always the case. Some entrepreneurs decide to incorporate in a different state if they determine it will offer financial and legal advantages.

The state in which a business is incorporated can affect how much it pays for formation filings and ongoing compliance. It will have an impact on its tax burden (different states have different state tax rates). And it will affect its legal responsibilities and vulnerability. These are serious considerations, and I recommend talking with an attorney and an accountant (or tax advisor) to get expert guidance to help you make an informed decision.

Do You Need a Lawyer to File?

Attorneys are among the most valuable resources business owners can have. By sharing expertise about the legal advantages and disadvantages of business entity types, lawyers can help entrepreneurs decide which legal structure (LLC, corporation, etc.) will benefit them most. Lawyers also advise on many other important law issues to help businesses stay in good standing with the state and avoid legal problems.

In addition to providing guidance, attorneys often prepare and file business registration documents for business clients. But entrepreneurs do not have to use a lawyer to file their business formation and compliance documents.

In fact, they may save a good bit of money by choosing an alternative:

• Do It Yourself – Business owners may prepare and submit their own paperwork. This is obviously the most economical choice—at face value anyway! It’s a wonderful option for entrepreneurs who have a firm understanding of how to complete and file the forms correctly. But if they make errors or don’t meet deadlines, the state might reject their requests, thus delaying their incorporation and costing them additional filing fees.
• A Reliable Online Document Filing Service – Another option is to contact an online document filing company to handle filings. For instance, CorpNet takes care of the incorporation and other filings in all 50 states at affordable rates. Our business filing specialists make sure that forms are completed correctly and submitted on time.

Final Thoughts About Incorporating

Filing a Certificate of Incorporation paperwork is just one of many steps involved in starting a corporation. Make sure you have a firm understanding of everything you need to pay attention to by researching the requirements in your state and asking legal and financial professionals for insight.