What is a certificate of incorporation?
- What is the right time to file for incorporation?
- Where should you file for incorporation?
- What do I need to for the certificate of incorporation?
- How to file for incorporation?
- Constitution of the company
- Amending Articles of Association
- What other documents should corporations file?
- What type of company?
- Do you need an attorney?
The certificate of incorporation is an important legal document required to establish the existence and incorporation of a company as a legal entity through which its agents can carry out business activities. As a legal entity requiring a document proving its existence, companies require a certificate of incorporation as much as humans require a birth certificate, a citizenship card, or a driver’s license to establish their identity. Hence, the certificate of incorporation can also be regarded as an essential document to establish its formation and existence and solidify that it is licensed to carry out the business for which it was made.
For example, let’s say that John and Mary decide to start a business selling organic fruits and vegetables. They register their business with the state government, and after meeting all the legal requirements, they receive a certificate of incorporation. This document shows that their business is legally recognized and can now operate as a legitimate entity. The certificate of incorporation gives them the right to do business, hire employees, open bank accounts, and enter into contracts. Without this document, they would not have the legal standing to conduct business activities.
The certificate of incorporation is obtained by providing the relevant information and submitting the set fees to the regulatory body that is given the power to oversee the matters of incorporation. Every country has its own regulatory body; In America, the certificate of incorporation is filed with the Department of State. In the United Kingdom, business registration or incorporation is done with the regulatory authority known as the Companies Register.
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What is the right time to file for incorporation?
Initially, when people start their businesses online or in person, they do not pay attention to incorporating their business, which brings multiple doubts to the minds of their consumers who doubt the authenticity and existence of the business as a genuine corporation that they can sue or file complaints against in case their experience is bad. However, many entrepreneurs or businessmen consider the question of when to incorporate their business once they start their dealings and earn profits.
When the benefits of incorporation exceed the costs, that is the right time to file for the certificate of incorporation to get the business registered and make it a legal entity capable of contracting legally. So when do the benefits exceed the costs of incorporation? Well, when a business initially makes customers, it wants to present the most professional image to its suppliers, investors, and customers so that when signing contracts or bargaining and negotiating, the other party considers the business to be credible and of high status. Furthermore, it is easier for business owners to stay under the corporate veil, which means they can enjoy limited liability protection if the business is incorporated or has a certificate of incorporation.
In addition to limited liability protection and having a more professional outlook, businesses can enjoy greater tax advantages and have the edge over unincorporated businesses regarding financing and finding investors and other finance sources. Tax advantages are such that the profits your company generates can be taxed, and the business owners can decrease their income, which they show to the tax collectors. This puts the business at a low tax cap as they pay out salaries and expenses, and the owners, who do not declare the business profits as income.
Where should you file for incorporation?
As mentioned before, the certificate of incorporation is obtained from the regulatory body that is appointed by the legislature of the country to undertake the activity. Hence, in the United Kingdom, the Companies Register is empowered with authority to grant the certificate of incorporation; in the United States, the Department of State is responsible for the granting of the certificate of incorporation; and in Pakistan, the Securities and Exchange Commission of Pakistan is responsible for the granting of the certificate of incorporation.
What do I need to for the certificate of incorporation?
The most basic information that goes in the certificate of incorporation is the name(s) of the people incorporating the company, the company name, and a copy of the ID of the people incorporating the company, but the most important is mentioning the principal line of business, which is the information that regards what a business aims to do to make a profit.
Other than that, the people partnering to incorporate the company need to include the agreement between them that sets the shares of the companies with their signatures. Lastly, it is important to fill out the Articles of Association and the Memorandum of Association, the formats of which have already been provided by the authorities; these two documents make up the constitution of the company as well and are important to setting up the framework of the company.
How to file for incorporation?
The certificate of incorporation can be applied online or through a practical application filed with the appropriate authorities. When applying online, it is important to read all the instructions or go through the appropriate tutorials provided by the authorities themselves to register or incorporate a company.
Once all the steps are followed, and the fees are paid, a copy of the incorporation certificate will be received. The incorporation fees depend on where you are filing them; each state has its fees for filing for a certificate of incorporation.
Constitution of the company
The constitution of the company contains the internal rules of the company, called the articles of association, and any object clause limiting the powers of the company. The memorandum of association states that the subscribers intend to form a company and become members. An application for registration contains the company name, its share capital, the address of the registered office, whether it’s a private or public company, that the liability of members is limited, a statement of the company’s directors’ names and addresses, and a statement of compliance.
The subscribers of the memorandum are those who agree to take some shares in the company. If the application to the registrar is successful, the subscribers become the first members of the company. Companies are required to specify their objects (what they are empowered to do and not to do, also known as the “objective clause”) in the memorandum.
The articles of association are a set of rules governing the operation of the company. Those setting up the company are free to draft their own rules, but if they do not provide such a set, then a model is always provided in the legislation that encompasses the incorporation of companies; for Britain, this may be the Companies Act 2006. In principle, the model articles are generally adopted with some slight amendments; the most important function of the articles of association is to allocate the powers of the company, the board, and the general meeting.
Amending Articles of Association
The articles of association can be amended within the company at general board meetings. Essentially, the Companies Act 2006 requires a minimum of one general annual board meeting; the amendments can only be passed in the case of a majority vote about the rules already drafted in the articles of association relating to its amendment procedure.
What other documents should corporations file?
Though there are no other documents required for the corporations that have received the certificate of incorporation, it is, however, recommended for these corporations to file for intellectual property proprietorship over the brand name and trademarks, as well as file the company with the state’s taxation regulatory body to receive a tax identity.
Apart from filing such documents and applications, the company should be aware that it has to file annual reports with the regulatory bodies regarding the profit it has earned, the overall revenue generated, and the losses borne to keep a record of its safe practice.
What type of company?
A company enabled by the regulatory body to advertise and sell its shares to the general public is recognized as a public limited company; these companies are registered with stock exchanges where they sell the shares to the public. A company that cannot sell its shares to the general public for trading is recognized as a private limited company. A company can be private initially and then transition to a public limited company.
Do you need an attorney?
No. In most states, all of the procedures required to register or incorporate a company can be carried out by private individuals or the company owners themselves without the assistance of lawyers.
However, hiring a lawyer for such tasks is always suggested, as they are experts at filing for the certificate of incorporation and are aware of the information required to incorporate a company. They can also advise company owners on what kinds of applications to file and reduce the overall time and effort it takes to incorporate a company.
In closing, the Certificate of Incorporation represents a seminal moment for a corporation as it signifies its formal recognition as a separate legal entity. Procuring a Certificate of Incorporation is a crucial aspect of the establishment process of a corporation, providing it with distinct legal standing and limiting the liability of its owners. Ultimately, the Certificate of Incorporation serves as a key document in establishing the legitimacy and regulatory compliance of a corporation.
LegaMart aims to provide maximum legal knowledge to its audience through its blog as well as its legal services. It has a directory of attorneys ready to represent any of its clients looking for lawyers. It aims to enhance the audience’s knowledge about incorporating a company and filing for the certificate of incorporation with this blog.