Incorporation is an interesting concept coming from the latin word Corpus, meaning body. According to the law, a corporation is a body therefore; it can buy and sell properties, file lawsuits, file contracts, pay tax, and commit crimes.
The main advantage of incorporating your business is to minimize personal liabilities at the expense of a corporate debts and obligations. According to law, a corporate is an artificially created legal body that stands alone, distinguished from the people who founded it.
Due to the latter fact many people willingly incorporate their businesses. Other advantages of incorporations are its continuity of life. i.e. people and partnerships may die, but corporations don’t because it is not run by a single person, sole handedly. Secondly, due to the wide recognition of corporation model, investors would be more likely to join hands with a corporation than with a sole proprietorship. Thereby, corporations receive a free pass to raise capital investments and expand their businesses, which means they grow continuously earning more and more profit. The third reason: in a corporation wealth is held as shared that can be easily sold or transferred. Therefore, there are no long procedures involved. Rather, quick gain of profit for whatever shares that need to be disposed of.
The main disadvantages of incorporations are the heavy load of formalities that need to be in place at any given time, the initial expense attached to setting up a corporation and annual fees paid to the State.
Here’s the procedure (in brief) on how to incorporate your business:
01. Find out the office responsible for registering corporations in the State you live in. You can get further details such as fees, details, regulations, eligibility criteria etc.
02. If you have time in your hands, you can carry out the procedures by yourself without the help of a lawyer. Simply read thoroughly on the subject and follow a program (perhaps online) that will guide you through the entire process of incorporation.
03. You will need to prepare a series of documents known as certificate of incorporation. In some states you will be asked to follow an official format whereas in others, you will need to come up with a suitable format. Attorneys usually know how to prepare these documents but if you are capable of getting them ready, you will save up to a thousand dollars on attorney charges and fee.
04. You will also need to state down the laws by which your corporation operates. This document will include the roles and responsibilities of shareholders, officials and the director board, meeting schedules and other important details.
05. When all these documents are duely completed and accepted by the secretary of state’s office or the relevant department in your state, a certificate of incorporation will be awarded to you. There on you are good to go!
Remember that incorporating is a serious business. Once you have committed, there’s no turning back. If you are thinking about breaking rules, don’t even bother going there for you will surely fall in trouble with a lot of people and the state laws.