A business venture cannot generally become a corporation by simply claiming to be one. A corporation must usually be approved or recognized by some type of government entity. A certificate of incorporation is a document that shows that a company has received that recognition. The circumstances for obtaining such a document are often contained in body of law, such as South Africa's Companies Act.
When a person is born, he is generally given a birth certificate which includes his name; establishing a corporation is much the same. A certificate of incorporation is a document that, among other things, names a business that has become a legal entity. In order for this naming to occur, it is commonly required that the business' name first be researched for duplicates and then reserved.
In some instances, the certificate of incorporation carries a great deal of legal importance. In other instances, this is not the case; it serves more as proof of registration. The degree of importance often varies by country.
Being a legal entity commonly means that this type of business is recognized by the law in a similar manner as an individual. It also means that the individuals who are part of the business have limited personal liability for the overall responsibilities and obligations of the corporation. If, for example, the corporation is sued, the individuals' assets are not usually considered for paying damages or debts.
In the United States, a business that has received a certificate of incorporation is subject to many of the same rights and legal obligations as an individual. For example, an established corporation may have the right to sue in its own name. Criminal charges that could be filed against a person may also be filed against such a business.
The process of obtaining a certificate of incorporation may be more complicated in some locations than in others. The exact requirements, rules, and waiting periods for obtaining the document can greatly vary. The authorities that issue these documents may also vary. There are some aspects that are fairly common, however.
In many instances, acquiring this type of document requires that the business be composed of individuals holding certain positions. In New Zealand, for example, a corporation must consist of at least one director and one shareholder. Obtaining such a document often requires disclosure of a physical address.
Sometimes obtaining a certificate of incorporation requires a charter. What the charter is required to contain can vary. It is common, however, for a charter to be required to include a business' purpose for existence.