LLC vs Articles of Incorporation: Understanding the Difference

What kind of legal structure to establish is one of the first choices you’ll need to make when beginning a firm. Corporations and Limited Liability Companies (LLCs) are two common choices. Both have advantages and disadvantages, but their founding documents are one area where they diverge. Corporations have Articles of Incorporation, whereas LLCs have an Operating Agreement. Do an LLC’s Articles of Incorporation exist then? The quick response is no. Let’s examine how the two documents differ from one another. Articles of Incorporation:

What are they?

Articles of Incorporation are a legal document that creates a corporation and specifies its fundamental details, including its name, mission, and the amount of shares that may be issued. It is a public record that is submitted with the secretary of state in the state where the company is incorporated. The names and addresses of the directors, the founding stockholders, and the registered agent are all included in the Articles of Incorporation along with other crucial details. Articles of Incorporation are significant for what reasons?

The purpose of articles of incorporation is to create a corporation as a separate legal entity from its owners or shareholders. As a result, the corporation is able to sign contracts, own property, and file or defend legal actions under its own name. The aim of the corporation and its organizational structure, as well as the maximum number of shares of stock that may be issued and the procedures for choosing the board of directors, are all outlined in the articles of incorporation.

Compared to corporations, limited liability companies offer greater business flexibility. Small business owners frequently favor them because they provide limited liability protection without the formality and responsibilities of a corporation. Although articles of incorporation are not required for LLCs, they frequently have an operating agreement. An operating agreement, which is a private contract between the members of an LLC, describes how the entity will be run, how decisions will be made, and how profits and losses will be distributed.

As a result, LLCs lack Articles of Incorporation. While corporations and limited liability companies (LLCs) both offer limited liability protection, their founding documents are different. Operating Agreements are used by LLCs, whereas Articles of Incorporation are used by corporations. When determining which business structure is best for you, it’s crucial to comprehend the variations between these agreements. You can make a wise choice by speaking with a business attorney or accountant.