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What is Articles of Incorporation?

Articles of Incorporation is also known as a Certificate of Incorporation or Corporate Charter. These are legal documents filed with a government authority, usually at the state level, to officially establish the existence of a corporation. The articles typically outline essential information about the corporation. This includes its name, purpose, location, structure, and the number and type of stock authorized to issue.

Why is it important or used in Accounting?

Articles of Incorporation are crucial in accounting for several reasons:

Advantages of Articles of Incorporation:

Disadvantages of Articles of Incorporation:

Example of Articles of Incorporation for a Wholesaler or Retailer Business:

Suppose a retailer decides to incorporate and files Certificate of Incorporation. The key elements in the Articles of Incorporation for this hypothetical retailer might include:

  1. Corporate Name: XYZ Electronics, Inc.
  2. Purpose: The corporation’s purpose is to engage in retail selling electronic goods.
  3. Location: The corporation’s principal office is at 123 Main Street, Cityville, State.
  4. Authorized Shares: 100,000 shares of common stock with a par value of $1 per share.
  5. Board of Directors: The corporation will have a board of directors responsible for overseeing the business.
  6. Duration: The duration of the corporation is perpetual.

These details, among others, would be outlined in the Certificate of Incorporation. Once filed and accepted by the relevant government authority, the corporation gains legal recognition, and these articles become a foundational document for legal and accounting purposes throughout the company’s existence.

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