What are Articles of Incorporation?

David van Moorsel

After you've decided that you do want to incorporate and know what kind of corporation to register, you'll need to decide how to set up the corporation's Articles of Incorporation.

So what are Articles of Incorporation? Articles of Incorporation describe what a corporation can and cannot do.

In most jurisdictions, the incorporator is responsible for determining the contents of the Articles of Incorporation. Articles of Incorporation typically include:

  1. the corporation's chosen name;
  2. a description of the type and classes of shares that the corporation can issue;
  3. the number of directors the cororation may have;
  4. whether there are any restrictions on share transfers;
  5. whether the corporation is restricted to or from carrying on certain business activities;
  6. other rules and provisions.

 

One of the most common mistakes made by first time business owners is failing to properly complete Articles of Incorporation.


Getting the Articles of Incorporation wrong can be an expensive mistake. The most frequent mistakes we see made by non-lawyers when filing Articles of Incorporation are:

  1. failing to put in place proper restrictions on share transfers that are required for the corporation to maintain its status as a "private issuer" for the purposes of securities legislation;
  2. putting restrictions on the business of the corporation when none are required;
  3. failing to properly review the proposed name of the corporation, resulting in costly rebranding and potential lawsuits against the corporation;
  4. failing to include a flexible structure that allows for several different classes of shares and accounts for future changes to the corporation.

These issues are not typically identified until a few years down the road. In some cases, the issues are not capable of being fixed. Where they can be fixed, it's often quite expensive to do so.

The best way to prevent these and other issues when incorporating is to set up your business with a qualified legal professional. A lawyer can take steps to make sure that the Articles of Incorporation and share structure are set up in a way that doesn't create future headaches and problems for your business. It may cost you slightly more to deal with a lawyer, but if you compare the price of incorporation and the added benefits of incorporating with a lawyer, we believe that the small additional one time cost is well worth it.

Your business is important to you. Don't take chances on it by incorporating without the help of a lawyer. Click on the Incorporate Now button below to get started today.