Articles of Incorporation Cost

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What do articles of incorporation cost? This is a question that many new business owners who wish to incorporate their company ask. Let’s explore this question and review some general information about articles of incorporation.

How Much Do Articles of Incorporation Cost?

Articles of incorporation, also known as certification of charter or formation, is the legal document that a company must file with the state government to legally incorporate a business. Articles of incorporation will include identifying information about your company and serve as legal proof that the company is established and eligible to conduct business in your state.

Many new business owners will hire a corporate lawyer to draft their articles of incorporation. These documents are essential to legally operating your business and cannot have any errors. Based on ContractsCounsel’s marketplace data, the average cost of a project involving articles of incorporation is $662.50.

What are Articles of Incorporation?

Articles of incorporation are one of several formation documents you will need to file if you want to incorporate your business. When a business becomes a corporation, the owners enjoy several benefits.

  • Legal Protection. When a business is incorporated, it is considered a separate entity from the owners. This provides the owners with liability protection for any lawsuits or collections that may be held against the business.
  • Stocks and Capital. An incorporated business can sell stocks and raise capital to expand the business with little risk to the owners.
  • Tax Flexibility. Corporations benefit from many tax breaks and have the choice to be taxed as a pass-through entity or like a C Corp that pays corporate taxes. Both tax models have positives and negatives for companies.

Along with articles of incorporation, new corporations must also draft and file bylaws which are a set of rules and regulations that govern the business. Both formation documents are vital to running a successful company.

How to Start a Corporation

Incorporating a business is fairly simple and can be completed in just a few steps. If you are unsure about your state and local laws, consult with a corporate lawyer to assist you in the incorporation process.

  • Step 1: Name your business. Each corporation must have a unique name that isn’t already in use in your state.
  • Step 2: Choose a location. You will need a physical address to file your articles of incorporation. Check your local codes and regulations to find out what locations your business can be operated from.
  • Step 3: Choose a corporate entity. You can register your company as either a corporation. If you choose a corporation, you must select either an S Corp or a C Corp. Each of these legal entities have advantages and drawbacks. Your business needs and goals will help determine which entity is right for you.
  • Step 4: File Your Articles of Incorporation. Once you choose your business entity, you will draft and file articles of incorporation with your state. Each state has different requirements so check with your local government for rules and regulations.
  • Step 5: Obtain a tax ID number. Your business tax ID number will be how the IRS keeps track of your business. You can apply for an EIN online. You will also need this number to open a business bank account to start managing your company’s finances.

Articles of Incorporation Projects

C Corp Formation

C Corps, just like S Corps, require the filing of articles of incorporation. Once the articles of incorporation are filed, the company owners can issue stock certificates to the initial shareholders in the company.

After formation, most C Corporations will hold their first shareholder meeting to draft bylaws and discuss how the company will be run and managed. Some companies choose to have attorneys draft bylaws to ensure they are fair and protect both the company and the shareholders.

These first steps to establishing a corporation can be confusing for someone without extensive business knowledge. It is a good idea to consult with a corporate lawyer for guidance through these beginning phases.

Articles of Incorporation Drafting

Many companies hire corporate lawyers to draft the articles of incorporation. After an initial consult and learning a bit about the company, the attorney will draft articles of incorporation that meet the company’s needs and are ready to be filed.

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Articles of Incorporation Cost

Drafting articles of incorporation will incur legal costs because it requires the time of a licensed business lawyer to complete the task.

ContractsCounsel’s marketplace data shows the average articles of incorporation drafting costs to be $662.50 across all states and industries.

C Corp Formation Cost

In addition to legal costs for consultations and drafting articles of incorporation, business owners will encounter several other fees for C Corp formations. These fees usually include filing fees, annual report fees, franchise tax, and various license and permit fees. These fees will vary by state.

ContractsCounsel’s marketplace data shows the average C Corp formation costs to be $663 across all states.

How Do Lawyers Charge for Articles of Incorporation?

Corporate lawyers generally charge an hourly rate for their legal services; however, it is becoming more common for lawyers to quote flat rate fees for contract drafting projects.

Hourly Rates for Articles of Incorporation

Hourly rates are usually the most common way that corporate attorneys charge for their legal services. In this fee agreement, the lawyer will charge the client a set hourly rate for the time spent completing the project.

Attorneys benefit from this fee structure because if a project takes longer than expected, they are compensated for their additional work. Although clients are aware of the hourly rate, they will not know the full cost of legal services until the task is completed, which can be seen as a disadvantage.

ContractsCounsel’s marketplace data shows the average hourly rate for a corporate lawyer range from $250 - $400 per hour.

Flat Fee Rates for Articles of Incorporation

Flat fee billing for specific drafting projects like articles of incorporation are becoming increasingly popular. In this fee arrangement, the lawyer will quote a flat rate, usually to be paid up front, for the cost of the project.

From the client’s perspective, a flat fee billing structure is usually more desirable because they know exactly what they are being charged for legal services. On the other hand, the attorney may be at a disadvantage because if the project takes longer than expected, they are held by the agreed upon flat fee.

It is important to make sure the client knows what’s included with the fee before starting the project. Consultations and revisions could incur additional costs.

ContractsCounsel’s marketplace data shows the average flat fee rate for articles of incorporation costs to be $662.50.

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