Paralegal Advanced Competency Exam (PACE) Practice Exam

Which document is essential for forming a corporation?

1. Partnership agreement

2. Articles of incorporation

3. Business license

4. Shareholder agreement

The correct answer is: Articles of incorporation

The formation of a corporation is primarily initiated by filing the articles of incorporation, which serve as the foundational document required to legally establish a corporation. This document outlines key details such as the corporation's name, purpose, registered agent, and the number and types of shares authorized to be issued. The articles of incorporation are crucial because they not only create a distinct legal entity separate from its owners but also provide important information that governs its operation and compliance with state laws. This document must be filed with the appropriate state authorities, typically, the Secretary of State's office, and serves as the official record of the corporation's creation. While other documents like a partnership agreement, business license, and shareholder agreements may play significant roles in business operations and governance, they are not essential for the initial formation of a corporation. The business license pertains to operating within a jurisdiction, while a partnership agreement is unrelated to corporations and is relevant only for partnerships. A shareholder agreement is also critical but functions as an internal document for governance among shareholders after the corporation is formed.