So you’ve started a new business. After you’ve celebrated with friends, family and associates, it’s time to make it official with the state. In order to get a business license, you’ll be asked to provide your company charter, which may also be called “articles of incorporation.” These documents, which are necessary to become a legal corporation, will describe your business and provide details such as your objectives and your mission. Once you have this document in place, you’ll find you’re using it in other areas, such as lining up business partners and pitching potential investors.
TL;DR (Too Long; Didn't Read)
A company charter is a document that details basic information about your business, including contact information and all business partners.
What Is a Company?
A company is another word for a business, and the term can encapsulate every type of business, from retail stores to restaurants to multinational corporations. At its core, a company is essentially a gathering of professionals who are all working toward the same goal. For this reason, you should begin thinking about your leadership team from the time you start your new business. If you’re a one-person operation, chances are you still rely on others, whether it’s the bank that gives you the small business loan or the treasured friend who serves as an adviser.
If you haven’t already, you’ll need to choose a company name before you can go to the state to register your business. This can be trickier than it seems at first. Your Secretary of State website will have a database of businesses that are already registered, and you can search for names that are already licensed in your state. At one time, this was the only thing you had to worry about, which meant you were only competing with the many other businesses in your own state. If you wanted to open a shop called Bella Boutique, as long as no one in your state had registered a business with that name, it was yours for the taking.
However, things have gotten much more complicated in the internet era. Every store needs a website, even if you plan to only sell items in a storefront. Locals will look for a website for basic information like where you’re located, what hours you’re open and what types of items you sell. You’ll probably find in time, though, that offering items online can boost your sales tremendously, making it worth at least uploading a few things and shipping items to those who can’t make it to your store. This means you’ll be competing with every other business for a domain name customers will be able to find. If BellaBoutique.com is taken, you’ll have to add a hyphen, expand the name or choose a different shop name altogether. If you can conduct this research before you register with the state, you can save yourself the struggle of trying to find a unique way to rearrange your URL to get around the fact that the one you’ve registered with the state isn’t available.
What Is a Corporate Charter?
A corporate charter is a document used to describe your business. Generally drawn up in the early days, your charter is filed with the Secretary of State when you want to make your company legal. The requirements for the contents of a corporate charter can vary from one state to the next, but usually you’ll need to include your company name and contact information, your business purpose, whether you’re nonprofit or for-profit and the names of all business partners.
Before creating your charter, check your local Secretary of State website for instructions. This will give you details on the documents you need, and it may even have templates you can use to make creating your company charter easier. Here you should also be able to search to make sure your chosen name is available and find any forms you’ll need when you apply for a license.
What Are Articles of Incorporation?
"Articles of incorporation" serves as another term for a company charter. There is no difference between a company charter and articles of incorporation. Professional legal counsel isn’t required to create your articles of incorporation, but the extra expense might be well worth it, especially if you’ve never incorporated a business before. An attorney who specializes in small businesses can help you know exactly what documents you need to provide the state and will provide them for you. If an issue arises relating to those documents, you can go back to the attorney to handle things.
One of the top reasons for registering a business is to provide legal protection in the event of a lawsuit or other legal dispute. This is a good argument for using an attorney. However, just because you do things on your own doesn’t mean you can’t seek legal advice if a problem arises. If you choose to do it yourself, you’ll just need to track down a name that isn’t already taken and submit the necessary documents to the state. You can probably do all of this through your state government website. There will be fees associated with this, but they’ll be notably less expensive than paying an attorney to handle things for you. If you feel you need legal help, you can use a site like LegalZoom or Nolo to locate and download any templates you might need.
Why You Need a Company Charter
The general purpose of a company charter is to publicly launch your new business. You aren’t official until you’ve filed with the state. Since you need a corporate charter to get a business license, it can also help to understand why you need a business license. A business license offers your company the basic legal protections necessary if you’ll be providing products or services to others. It gets you set up to collect and remit sales tax as well as withhold and submit income tax for your employees.
If you plan to set up a physical location for your company, you’ll need a business license to be legal. Otherwise, you could show up one day to find a padlock on your front door. Even if you sell items at a local flea market or craft fair, you may find someone from the state shows up asking to see business licenses for all vendors.
Creating a Company Charter
Once you’ve worked out why you need a company charter, you’ll want to get started creating the document. Before you go through the steps of doing one yourself, check the requirements of your local Secretary of State office. You can find templates online, but you’ll want to make sure the document has all of the required information, or your application for a business license may be kicked back. Your Secretary of State’s office may even require you to put the information into a form they provide, which means all the work you did to create a formal document will be wasted.
In most states, you’ll simply need to provide documentation that shows your ownership, management structure or directors. If you’re registering a Limited Liability Company, you usually can submit a simple document with this information. This goes by the company charter definition, but corporations may need to submit a detailed company charter that includes the same information required for smaller businesses but in a more comprehensive format.
Your company charter will focus heavily on the people who will be responsible for pushing your business forward. You’ll need to include brief bios and credentials for each of the people working with your organization, including yourself. If you use contractors to help with things like your graphic design or content writing, ask for permission to include them on your team for paperwork purposes. This doesn’t mean you have to publicly post their profiles on your website unless you find it mutually beneficial, but it can help to have them in your documents as you incorporate and seek financing or business partnerships.
Using a Registered Agent
If you’re filling out a form or following a company charter template, you’ll likely see a request for your business’s registered agent. Even if you aren’t directly asked for it, you need a registered agent to help with your business. A registered agent will act on your behalf in receiving communications from attorneys and state authorities, including notices of legal action and tax forms. You can do this yourself, but it isn’t recommended. If you’re served legal papers, you won’t want it to happen in front of your employees. Having a registered agent means those papers will be delivered to that person’s office instead of yours. You’ll also find that having a registered agent means the address registered online is his rather than yours, which comes in handy if you’re working from home or you simply don’t want your location to be easily found.
Although there are probably plenty of third-party services when you search your own local area, not all registered agents are equal. If you’re being notified of a lawsuit and your agent doesn’t pass the paperwork on to you, you can miss important court dates and possibly lose by default. Check reviews of any registered agent services you’re considering and eliminate any that have complaints. If you have trusted friends or colleagues who run businesses, ask for recommendations. Make sure your chosen agent has a physical office and offers fast, reliable mail-forwarding services. Your agent should be aware of laws that apply to your type of business and be prepared to act as a mediator.
Additional Documents and Considerations
As you’re creating your company charter and designating the individuals associated with your new business, there are other documents you’ll need to consider. Protecting your new venture is essential, especially when it means distancing your personal assets from liability. Incorporating as an LLC can help, but once you become a corporation, you’ll also have protection. Although sole proprietorships and partnerships can be simpler to set up, they offer no protection for your personal assets. That means if your business faces a lawsuit, your home and household bank account could be at risk.
In addition to purchasing insurance for your new business, you can also ensure that everyone with whom you work signs contracts. You don’t need an attorney to draw these up and legitimize things, but having the documents notarized or at least witnessed can help. At various points you’ll need signed employment agreements, independent contractor agreements, confidentiality agreements and termination agreements. You’ll also need to protect yourself in any business dealings with paperwork like partnership agreements, indemnity agreements and stock purchase agreements. You may choose to protect your business by having business partners and managers sign noncompete agreements, which keeps you from seeing an employee take your secrets to a competitor after severing ties with you.
Writing your company charter and registering with the state is only the beginning. You’ll need to set up your business presence online and find your customer base. However, as far as your company charter is concerned, you’ll also need to occasionally revisit it and update it. It’s important to know that if you’re ever asking, “What are articles of incorporation?” they are the same thing as your company charter. You may find you’re occasionally asked for your company charter or articles of incorporation, especially if you seek investor funds or you’re considering a buyout.
In addition to regularly revising your business charter, you’ll also want to pay close attention to the licensing requirements for your state. You probably will need to renew your license every year, a process that will generally only require paying a fee and updating your information on your Secretary of State’s website.
- Investopedia: Corporate Charter
- InvestingAnswers: Corporate Charter
- Tennessee Secretary of State: For Profit Corporations
- U.S. Small Business Administration: Register Your Business
- MyLLC.com: How to Choose a Registered Agent
- Money Crashers: 8 Asset Protection Strategies – How to Protect Your Wealth From Lawsuits
- WoltersKluwer: Do I Need a Business License or Permit for My Home or Online Business?
- CorpNet: You Don’t Need a Lawyer to Incorporate
- Wolters Kluwer: Why Do I Need a Registered Agent?
Stephanie Faris is a novelist and business writer whose work has appeared on numerous small business blogs, including Zappos, GoDaddy, 99Designs, and the Intuit Small Business Blog. She worked for the State of Tennessee for 19 years, the latter six of which were spent as a supervisor. She has written about business for entrepreneurs and marketing firms since 2011.