The Articles of Incorporation (AoI) as a Necessity for a Corporation Essay

The Articles of Incorporation (AoI) as a Necessity for a Corporation - Essay Example This section, together with the first section, distinguishes the type or category of the corporation; for example, profit or not-for-profit organizations. Because the AoI is the legal basis for the relationship among incorporators, there is a section that spells out the limitations to the powers and privileges of those that manage the corporation as it regards the, for instance, earnings of the corporation. It further distinguished what is personal and what is corporate in terms of assets and liabilities. In addition, the AoI states the management structure of the corporation including board members. A section usually outlines this structure, membership and roles. As a reference document, the AoI also makes provisions for managing corporation’s assets and liabilities in case of dissolution. Finally, the AoI carries the signature of the incorporators or the legally recognized representatives (http://managementhelp.org/legal/articles.htm). Because AoI is a legal document, it must be signed by the incorporators or the legally recognized representatives. It is usually prepared by legal practitioners and approved by government agencies. Once it is signed and sealed, it becomes the reference document for the operation of the corporation. Changes, such as the transformation of a private corporation owned by few individuals to a public corporation owned by a large number of shareholders and usually quoted in the stock market, must be reflected in the respective sections and clauses. Agency theory seeks to explain the relationship between a principal(s), who hires an agent(s) for services and delegate the power of  decision-making to the agent(s). It also seeks to examine variations in behaviors in the principal-agent relations. These relations could be harmonious or frictional.