Angel Investors Network
    Glossary

    Articles of Incorporation

    The legal documents filed with a state government to formally establish a corporation, defining its purpose, share structure, and basic governance.

    Articles of Incorporation are the legal documents filed with a state government authority to formally create a corporation and establish its existence as a separate legal entity. These documents serve as the corporation's charter, outlining fundamental information including the company's name, business purpose, authorized share structure, registered agent, and initial board of directors.

    When entrepreneurs file Articles of Incorporation (also called a Certificate of Incorporation in some states like Delaware), they typically include the company's official name, the number and types of shares the corporation is authorized to issue, the par value of shares if applicable, and the registered office address. The document must be filed with the Secretary of State or equivalent agency in the state where the company incorporates. Delaware remains the preferred jurisdiction for startups and venture-backed companies due to its well-established corporate law and Court of Chancery that specializes in business disputes.

    Why It Matters

    For angel investors, Articles of Incorporation define the fundamental rights and limitations that govern their investment. The authorized share count determines whether the company has sufficient shares to accommodate your investment without requiring an amendment, which could delay closing. The document also establishes whether the company has authorized preferred stock—the typical security issued to investors—or only common stock. Understanding these parameters helps you assess whether the company's corporate structure can support your investment terms and future financing rounds without costly restructuring.

    Example

    A tech startup in Delaware files Articles of Incorporation authorizing 10 million shares of common stock and 5 million shares of preferred stock. Two years later, when seeking Series A funding, an angel investor discovers the company has already issued 8 million common shares to founders and employees. The remaining 2 million authorized common shares are insufficient for the planned option pool expansion. The company must file an amendment to increase authorized shares, which requires board approval and shareholder consent, potentially delaying the funding round by several weeks and adding $2,000-$5,000 in legal fees.

    Certificate of Incorporation
    Authorized Shares
    Corporate Bylaws