When we're in the process of building a business, this one word seems to always niggle in every page that we read. Incorporation. What is incorporation actually? Why is it so important to do this when we're about to establish a business entity?

What is Incorporation?

Incorporation is a legal strategy or a procedure that was done to separate the company assets and the company owner's personal assets. Thus in the middle of every possibility that might happen to the business, you can rest assured because the personal asset won't be part of the liability.

To incorporate your company, you need to first choose your company's legal name. Choosing a company's legal name is definitely not easy. It requires you to really think it through in order to find the best and unique name that is well-suited to your company profile. Your company's legal name will be used on various documents like contracts, invoices, and purchase and service orders. It will also be the name that you use during the incorporation process. 

After incorporating, your company will have added phrases like "Inc." or "Limited (Ltd.)" at the end of its name.

How to Incorporate a Business?

Although the legal specifics of a corporation's establishment and organization vary from one jurisdiction to another, it mainly shares the same features in order to incorporate a business.

First articles of incorporation must be written when you are about to incorporate your company. The documents need to describe all of the main objectives of the company, its exact location, the number of shareholders, and who are the true owners of the corporation. Small businesses may have just one stakeholder, whereas large businesses that are frequently traded publicly may have thousands.

Typically, shareholders are only liable for their own shares' payment. The shareholders have a right to partake in the company's profits, which are often paid out as dividends. The company directors which are in charge of daily operations have a responsibility for the day-by-day business activity. The figure for this position will be chosen by the shareholders every once a year. Smaller businesses may just have one director, whereas larger ones frequently have more boards. 

You must adhere to a few processes if you want to incorporate your company:

  • Select the location where your company will be incorporated.
  • Choose the structural type that best supports your company's objectives. You can make a better decision for yourself and other stakeholders by speaking with an attorney or an accountant.
  • Choose the  managerial team of your company or the directors of your corporation.
  • A registered agent must be named in the articles of incorporation in order to receive vital tax and legal documents on behalf of a company. 
  • Find out which business licenses your company needs. For instance, you must register for payroll taxes if you want to recruit staff, and you must register for sales taxes if you intend to sell things.
  • Prepare and then submit the articles of incorporation under the state's relevant authority's requirements.

Incorporation will require you to pay for certain expenses. Thus make sure you have prepared some funds before incorporating. You may want to hire the help of a professional instead of doing it by yourself, due to the many processes that you may have to do. If yes, you can check out WealthBridge Corporate Services which can help you every step of the way while doing company incorporation.

The Advantages of Incorporation

The are so many advantages that business owners can get after incorporating, such as:

  • Ensure that personal assets are safe and not part of the company's liabilities
  • Easily transfer ownership to another party.
  • Can have lower tax rate than personal income
  • More lenient tax restrictions 

After incorporation, a protective bubble of restricted liability effectively surrounds the shareholders and directors of the company. As a result, incorporated businesses can take the risks necessary for growth without endangering the owner, shareholder, or director personal finances beyond their initial investments in the business.

But unfortunately, not many people who are about to enter the business world think that there is an urgency to incorporate. While on the other hand, aside from being able to protect personal finance, ensuring you incorporate your business will help to make it develop significantly faster. This is because you don't have too many doubts or personal stakes in order to grow the company.