What is a certificate of incorporation?

Legamart preparing documents for certificate of incorporation

Introduction 

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. 

LegaMart provides professional legal services that can help you file for the certificate of incorporation, and we are equipped with the best legal professionals at your disposal.

What is a certificate of incorporation?

A certificate of incorporation is a legal document indicating that you have successfully established and registered your limited company with Companies House per the Companies Act 2006. Essentially, it serves as your company’s birth certificate, presenting its name, registered number, and incorporation date, as well as the type of company you’ve formed and the location of its registered office.

What is the Importance of a Certificate of Incorporation?

Incorporation of a business is necessary for every business for several reasons: 

Limited Liability Protection 

Incorporating your business offers protection from liability by shielding your personal assets. When a business is incorporated, it becomes a separate legal entity that can own assets, incurs liabilities, and sue or be sued in its name. This means that the personal assets of the business owners, such as their homes or cars, are generally not at risk if the business faces legal or financial challenges. Similarly, if you run an unincorporated business, your creditors may have access to your personal assets, including your residence and bank account, to pay off debts or legal judgments against your business.

Credibility and Professionalism 

Incorporating a business adds credibility and professionalism to the company’s image, which can help attract customers, investors, and partners. Customers tend to place greater trust in businesses with a positive image, and incorporation can help achieve this perception. It also shows that the business is committed to long-term success and has taken the necessary steps to establish itself as a legal entity.

Access to Funding

Incorporation makes it easier for businesses to access funding through bank loans, lines of credit, and other forms of financing. Lenders and investors may be more willing to provide funding to a business that has a formal legal structure and established governance procedures. Similarly, incorporation can make the company more appealing to banks and investors, who may be more willing to finance a business with a more established and reliable legal structure.

Tax Benefits

Incorporation can lead to tax benefits for businesses. When a business is incorporated, it becomes eligible for tax deductions on its operating expenses, which can help reduce the overall tax liability. Such deductions may include costs associated with employee wages, insurance premiums, retirement plans, and expenses related to material and production costs.

Perpetual Existence

Incorporation provides for perpetual existence and transfer of ownership, i.e. the company can be sold or transferred to new owners, and it can continue to operate under the same legal structure and name. Therefore, the business can continue to operate even if one of its owners passes away or leaves. In contrast, an unincorporated business can be challenging to transfer ownership. By incorporating, shareholders can transfer their ownership interest through gifts or sales, facilitating smooth ownership transitions.

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.

When will I need to use my certificate of incorporation?

Your certificate of incorporation contains essential information about your company, such as your company registration number (CRN) and date of incorporation, and may be required for various purposes. Here are some instances where you may need to provide the certificate of incorporation:

  • Establishing a business bank account
  • When applying for grants, licenses, and permits related to your business
  • When applying for a business loan
  • Acquiring property for your company, either through purchase or rent, under the name of your company.
  • Setting up accounts with suppliers and service providers
  • Seeking investment from third parties, such as new shareholders
  • During business restructuring or selling 

What is the process for obtaining a replacement for a lost certificate of incorporation?

In case you misplace your certificate of incorporation, there are several options to obtain a new copy:

Access online via Companies House Service

Suppose you established your company via Companies House’s online incorporation service. In that case, you can download a copy of the certificate of incorporation through the Companies House’s online service. This service is also helpful in obtaining the incorporation certificate for other electronically formed companies where the provider cannot or refuses to forward a copy.

Order a physical replacement from Companies House

You can request a replacement paper certificate of incorporation directly from Companies House by contacting their helpline or visiting one of their information centres. The standard service costs approximately £15.00, and the same-day service costs approximately £50.00. you can also request digital copies via email.

Contact your company formation agent

If you used a company formation agent to create your company, you might be able to obtain a replacement digital or paper copy of your certificate through them. 

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. 

Certificate of Incorporation and a Business Bank Account

When opening a business bank account, the Certificate of Incorporation is a vital document you must present. This certificate proves that you have established your business appropriately and that it is a legal entity listed on the public register of companies.

Due to regulations regarding money laundering, banks must follow strict rules. As a result, you must provide identification and documents related to your company’s formation in addition to the Certificate of Incorporation. Other essential documents that you must provide include the memorandum, Articles of Incorporation, and any issued share certificates.

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 including international protection 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.

Conclusion

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.

Frequently Asked Questions

Do I need a new certificate of incorporation if I change my company name?

When a company changes its name, Companies House will issue a ‘certificate of incorporation on change of name’ bearing the same company registration number and date of incorporation as the original certificate. Retaining both old and new certificates at the registered office address is recommended, as all other information on the new certificate remains unchanged.

Do I need a new certificate of incorporation if I change my company name?

If you change your company name, it’s necessary to apply to Companies House for an updated certificate of incorporation. The new certificate will show the updated company name, but all other information, including the company registration number and incorporation date, will remain the same as the original certificate.

Can I change the information on my Certificate of Incorporation?

As a company evolves and grows, the information in its certificate of incorporation may need to be updated. To do so, the company must complete and submit the necessary forms and pay the relevant fees to Companies House. The registrar will then review and approve the changes and update the official records accordingly.

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