A corporation or nonprofit organization isn't a legal entity until it has been registered with the state and federal government. In order to register, it must have a company charter, also called Articles of Incorporation. The Articles of Incorporation includes the pertinent, basic information about the company, including name, location, stock treatment and product description. A Certificate of Incorporation is then given when the Articles of Incorporation have been approved by the state.
A company charter includes the basic information about a company, such as incorporators -- usually the company founders -- location, type of company and company name. It also contains the company's mission, establishes a board of directors and distribution of shares of company stock. The company charter should be the outline for the corporation’s formation and initial operations.
Charter documents not only are used to register the company, they are the actual guidelines for starting the company. Furthermore, if applicable, the company charter transitions a company from a sole proprietorship or partnership to a corporation. Once the charter is approved, the company exists. In essence, the charter help give birth to the corporation, which grows based on the goals, mission and activities outlined within the charter.
Writing a company charter requires the aid of an attorney or a businessperson with the knowledge to properly lay out the company’s information in such a document. Many company founders write their own charters, which do not have to be intricate. Most states offer a template that business founders can use in creating a charter. Whoever writes this document, the writer must be knowledgeable in the business’s startup activities, goals and basic information. The writer must also be familiar with the state and federal laws governing corporations in your area.
You must pay a fee to file the charter, which varies from one state to another. Nonprofit organizations often are charged a reduced filing fee. Contact your state’s Secretary of State office for more information.
A company charter is only required when creating a corporation. Other business entities require various other forms of filings and fees, but a charter is not one of them. However, a charter is a valuable document and a useful way to outline the start-up of your company. It can be used by the owners and founders of any type of business.