Certificate of Incorporation: What It Is and How It Works

A certificate of incorporation is a legal document that creates a corporation. It may also be called a corporate charter or articles of incorporation. The certificate is filed with the Secretary of State or a similar agency in the state where the corporation is being formed.

The certificate contains basic information about the corporation, including its name, purpose and structure. It also establishes the rights and responsibilities of the corporation’s owners (shareholders), directors and officers.

This article explains what a startup’s certificate of incorporation is, why it’s important and how to obtain one. If you need legal support to draft and file your certificate of incorporation, feel free to contact us here.

Key Provisions in a Startup Certificate of Incorporation

Since Delaware is by far the most common jurisdiction for startups to incorporate in, this article will focus on the Delaware certificate of incorporation. Though most states have similar requirements, you’ll want to work with an attorney to understand what’s required in your state.

To obtain a Delaware certificate of incorporation, the following legal requirements must be met:

  1. Name: The corporation must have a unique name that does not conflict with any other registered business in the state of Delaware. The name must include a corporate suffix, such as “Inc.,” “Corporation,” “Company” or “Limited.”
  2. Registered Agent: The corporation must appoint a registered agent who will receive legal documents on behalf of the corporation in Delaware. If you want to learn more about registered agents and how to get one, click here.
  3. Purpose: The company must clearly outline the nature of its business or the purposes it intends to conduct or promote. It is acceptable, and quite common, to state that the corporation’s purpose is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. By doing so, all lawful acts and activities will fall within the corporation’s purposes, except for any express limitations. Note that if you are incorporating a public benefit corporation, you will need to state a specific social or environmental purpose. For more information on public benefit corporations, click here.
  4. Shares: The certificate of incorporation must specify the total number of shares of stock that the corporation is authorized to issue. This is known as the “Authorized Shares.” If the startup is authorized to issue only one class of stock, the certificate must state the par value of each share or indicate that all shares are without par value. If the startup is authorized to issue more than one class of stock, the certificate must specify the total number of shares of all classes of stock that the startup is authorized to issue, the number of shares of each class, and whether each class of shares is to be with or without par value. Additionally, the certificate must include a statement of the designations, powers, preferences, rights, qualifications, limitations or restrictions of each class of shares.
  5. Incorporator: The certificate of incorporation must list the names and addresses of the incorporator who is initiating the incorporation process.
  6. Signature: The certificate of incorporation must be signed by at least one incorporator.

In addition to these requirements, the certificate of incorporation may include:

  1. Management. Provisions for managing the business and conducting the affairs of the corporation, as well as any provisions that create, define, limit or regulate the powers of the corporation, its directors and its stockholders.
  2. Rights to Future Securities Offerings. The corporation may grant provisions to the holders of the corporation’s stock, or the holders of any class or series of stock, to have the preemptive right to subscribe to any or all additional issues of stock of the corporation.
  3. Voting on Corporate Actions. This provision requires a vote by a supermajority of the stock, or any class or series thereof, or a supermajority vote of directors to execute a specific corporate action.
  4. Duration: The certificate of incorporation may specify whether the corporation is to be perpetual or have a limited duration.
  5. Debts. A provision can be imposed on stockholders of a corporation, specifying the extent and conditions of their personal liability for the corporation’s debts.
  6. Liability. This provision eliminates or limits the personal liability of a director or officer to the corporation or its stockholders for monetary damages resulting from a breach of fiduciary duty as a director or officer.

Steps to File a Certificate of Incorporation in Delaware

The process of filing a certificate of incorporation in Delaware is as follows:

  1. Choose a company name and entity type. You need to make sure that your desired business name is available and not already taken by another entity in Delaware. You can use the online name search tool on the Division of Corporations website to check the availability of your name.
  2. Select and contact a registered agent. You need to appoint a registered agent who will accept official mail and legal papers on behalf of your corporation. The registered agent must have a physical address in Delaware and be available during normal business hours. You can choose an individual or a company that provides registered agent services. You need to obtain the consent of your registered agent before filing your certificate of incorporation. If you’d like to learn more about registered agents, click here.
  3. File a certificate of incorporation. You need to prepare and submit your certificate of incorporation to the Division of Corporations. This document contains basic information about your corporation set forth above. Here is a sample certificate of incorporation from Delaware, but you may want to work with an attorney to draft one that is better suited for your startup. You can use the online filing system or mail two copies of your document (one original and one copy), along with a cover letter and a filing fee. The filing fee depends on the number of authorized shares and the par value of your stock.
  4. Receive your certificate of incorporation. Once the Division of Corporations processes your document, you will receive a certified copy of your certificate of incorporation by mail or email. This document serves as proof that your corporation is legally formed and registered in Delaware.

This article establishes the basic information about the certificate of incorporation, including its name, purpose and structure, as well as the rights and responsibilities of its owners and officers. If you’re looking for legal support with your certificate of incorporation, reach out to us here.

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