Incorporating a business – How and why you should do it?

Incorporating a business – How and why you should do it?

The word ‘corporation’ is derived from another Latin word ‘corpus’ which means body. A corporation is nothing but a body which is a legal entity in the eyes of law. A corporation can sell and buy property, bring in lawsuits, buy and sell contracts, be taxed and also can commit crimes. The most considerable feature of a corporation is that it safeguards its owners from personal liability for business obligations and debts, within limits.

The corporation is deemed to be a superficially created legal identity which exists separately from those people who created and carried the operations. You can form an S-corp by filling an application in the specified state. The incorporator will put the record facts like:

  • The purpose of the required corporation
  • The addresses and names of incorporators
  • The types and amounts of capital stock which the corporation will issue
  • The privileges and rights of the stock holders

Why do you need to incorporate?

It’s true that operating in the form of a corporation has its pitfalls in few situations. Being a business owner, you would be responsible for record keeping and maintaining administrative details. Moreover, in some cases, operating as a corporation can lead to added tax burden and this is almost the last thing which a business owner might need, during stages of business operation. Here are the few reasons behind corporations being a good vehicle for operating a business.

  • Unlimited life: Unlike partnerships and proprietorships, the lifespan of a corporation isn’t dependent on the life of a single individual. Until and unless it obtains all sorts of objectives, it can continue for an indefinite period, merge with another business and even file bankruptcy. This could continue indefinitely if stated otherwise.
  • Shares can be transferred: It’s always interesting to know that the ownership interest which you have towards the business can be transferred, sold and even transferred to another member of the family. Property needs to be retitled, new deeds can be drawn and there can be other steps taken at any time when there is even a small change in ownership.
  • Capability of raising capital for investment: It is easier to lure new investors within a corporate identity due to limited liability and the simplicity of transferring shares. Shares of stock can be directly transferred to new investors or when offerings to the public are engaged.

Incorporating and the advantages

  • Owners are safeguarded from personal liability from the obligations and debts of the company
  • Corporations have a dependent body of legal bodies to guide managers and owners
  • Corporations tend to be the best asset for public companies
  • Corporations can raise capital easily via selling securities
  • Corporations have a long life
  • Corporations can transfer ownership through security transfer
  • Corporations have tax perks under certain circumstances

Therefore, if you’re wondering about why you should incorporate your business, you can take into account the above mentioned facts. To know more, you can check out Incfile reviews as they allow you to set up an online business immediately.

Category Business

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