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Lee Phillips explains the importance of articles of incorporation or organization, which are essential documents filed with the state to create a corporation or LLC. These documents provide legal permission to operate a business under specific rules, offering benefits like limited liability and tax structures. Phillips emphasizes the need to understand these articles, noting that many lawyers may present unnecessarily lengthy documents, while states typically require only minimal information for establishment. He encourages entrepreneurs to be informed about the content and significance of these foundational papers.