If you’re looking to establish your business, you need a corporate charter.
Whether you’re thinking of going the route of LLC, Inc, S-Corp, profit or non-profit, you need a legally established corporate entity.
What is a corporate charter?
A corporate charter is also known as the “articles of incorporation” or “articles of organization.” In essence, it’s a corporation’s birth certificate.
The requirements will vary depending on country, and if you’re establishing your business in the United States, by state.
You may often hear of someone establishing their business in more tax-friendly states, such as Delaware or Texas for these reasons.
Without a corporate charter, you cannot legally conduct or protect your business, business expenses, or taxes.
What’s in a corporate charter?
While varying state to state, a typical corporate charter includes the following information:
- Name of the corporation
- Type of legal entity (Limited Liability Corporation, Incorporation, Partnership, Sole Proprietorship, Corporation)
- Registered agent (person forming and founding the corporation)
- Business address (depending on the state and business type, there may be restrictions around this)
- Industry and purpose of your corporation
- Signed statement
- If there are stocks included in the legal documents, the number of shares the business has the legal authority to issue and at what valued amount per share must also be listed
Once you file a corporate charter, you need to wait for approvals from the state.
From there, this document legally establishes your business within either the United States or Canada, clearly defining legal governance, operations, and business structure.
PandaDoc makes it easy with our Articles of Incorporation Template. Simply enter your variables into the fields and fill out your business information.
Once you’re ready, you can date, sign, and send the document.
Once your corporate charter is signed, you’ll need them notarized.
We streamline this process by offering a Notary on Demand.
Our state-commissioned notaries are available virtually to help execute and complete the notarizing of your documents in minutes.
Purpose of a corporate charter
While some may start to operate a business before the filing and approval of a corporate charter, this opens them to great personal risk.
If the business were to be sued, for example, without a corporate charter in place, the individual would be sued instead.
This can lead to the freezing and possession of personal property and assets, being personally liable for debts, damages, and more.
Once a corporate charter is in place, a business may operate with protection under corporate law.
Rather than an individual being at risk for all the corporations operations and consequences, there is a legally bound entity in place to limit liability.
Corporate charters also allow businesses to save on taxes.
For those who may be freelancing, establishing a corporation is something to consider.
Past a certain point of generated revenue, an individual will be paying higher taxes than they would if they had a corporation to pass it through.
There are a number of ways to do this, such as opting for an S-Corp election under the establishment of an LLC.
This is a popular option for those who may be working for themselves or with very small companies.
Seeking the advice of a business lawyer and certified tax professional can help you better determine which is right for your business.
ZenBusiness is a popular choice that makes creating a corporate charter easy through Business Formation Services.
Legal requirements for corporate chapters
Once your corporate charter is filled out, signed, and notarized, you’ll need to send the documents to the Secretary of State in accordance to state laws and pay a filing fee.
What to include and how much you’ll need to pay will be available on your state government website.
Once it’s approved you’ll recieve your certificate of incorporation and you’re in business!
Benefits of corporate charters
In addition to tax breaks, corporate charters can have several other benefits.
- Flexibility in ownership with easy, legal transferral
- The board of directors and stockholders are protected by being legally liable for the amount they’ve invested
- Access to capital is easy, allowing corporations to sell stock when needed and funnel the revenue into growth, investments, business expenses or inventory
- Credibility is established when a business is legally formed, giving any potential customers peace of mind that they’re dealing with a sound and legitimate organization
Once you’re up and running, you’ll likely need future templates, quotes, e-signatures, forms, and more.
Disclaimer
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