Starting a business takes more than just a passion for a market idea. A successful entrepreneur must also have a bit of business acumen. One area to understand: when your business needs to incorporate or form an LLC or other type of entity.
What is a certificate of formation? The terms ‘articles of incorporation’ or ‘certificate of formation’ refer to legal documents filed with the secretary of state or division of corporations in a particular state. State law requires to form an entity such as a C corporation, S corporations, LLC, limited partnership, professional corporation or PLLC.
To file, at a minimum you need to choose a business name that is unique in the state and appoint a registered agent in the state. The agent is responsible for accepting service of process on legal documents and receiving certain mail. Although the particulars will vary depending on the state where the business is organized, most also require the articles of incorporation or certificate of formation to also include the business’ address, purpose and sometimes a list of directors, managers or other governing persons. For a corporation, the filing will likely also require inclusion of the number and class(es) of shares.
What if I do not have file articles of incorporation or a certificate of formation? If you have not registered your business with the state, you are not taking advantage of the potential for a limited liability structure that may help shield you and your assets outside the business from personal liability for obligations associated with the business.
How do I file articles of incorporation or a certificate of formation? Each state has its own requirements. All states charge a fee for filing. Often there is a form provided by the state, but not all businesses should use the basic form. If the paperwork and fee payment are in order, the state will record the filing and return evidence of the new entity.
Once filed, it is important for a new business to stay in compliance with state requirements to maintain the chosen business structure. This can include tax filings, annual reports, and other particulars. Companies that do business in more than one state may need to file tax returns in several states and may need to file the “qualify” to transact business in several states.