Incorporation

Definition

Incorporation is a procedure that declares that a corporate company is separate from its owners. There are many benefits of incorporation both for the owners and business, such as:

• Offers protection to the assets of the owner against the liabilities of the company
• Allows ownership to be easily transferred to the other party
• Achieves a taxation rate that is lower when compared to the rate applicable on personal income
• Permits capital raising via stock selling

Incorporation also includes drafting of an ‘Articles of Incorporation’ that enlists the main purpose of a business in addition to its location and the number of shares as well as stock class that is being issued. Thus, incorporation helps in protecting the owners of a company in addition to its directors and shareholders. Businesses that have been incorporated can afford to take risks, which allow them to grow without the shareholders, directors and owners being exposed to finance related liability.

Incorporation of business might be appropriate for some business owners. However, it is not meant for every business owner. Therefore, it is important to analyze whether business incorporation is apt for you or not.

Benefits of Incorporation

A company that has been incorporated can afford to enjoy protection from any sort of personal liability for the obligations and debts of the business. Thus, if a person sues your entity, then he/she possesses the right to run after your entity’s assets and not the personal assets owned by you. In addition to this, if you opt for incorporation, then your company would enjoy some tax advantages under few specific circumstances. By incorporating your company you can make your entity more credible and create a unique identity of your own business. Incorporation also gives you the opportunity of raising capital in a much more easy way via securities and stock selling.

It is important to file the incorporation with the state government and whether the business owner chooses to do it via an attorney or by approaching a company that offers online legal services is entirely up to him/her. The owners must however, look for recommendation and referrals from those companies that have undergone the procedure.