How To Incorporate
As part of learning
how
to incorporate, you need to consider carefully the
all the legal and financial implications when you
incorporate a
business.
As an overview, when you
incorporate a business, it means you are giving your business a
separate legal identity. Prior to incorporation, you
as the proprietor of the business own the assets of the
business, but more importantly are personally responsible for
its debts and liabilities. If you choose to
incorporate a business you will protect your personal
property.
Following incorporation you will only be liable for amounts
owed by the business up to the amount you have invested in the
business. Beyond
your invested shareholding you will have no liability for the
settlement of amounts owed to creditors (unless you have signed
separate personal guarantees for any specific loans or
debts).
Conversely, your business will also be protected from any
personal debts you incur in your private live away from the
business. When for
any reason an incorporated company ceases to trade, all
creditors and liabilities must be paid before any capital can
be released to the shareholders, simply put the shareholders
are last in line for repayment.
The decision to incorporate a business can be
very important if you are looking to grow your business in the
future. Incorporated businesses often find it easier to raise
capital for expansion from financial institution’s, also your
personal credit rating will not effect that of the business
when you are seeking to raise additional
funding.
When you incorporate a business it gives
the financial world a feeling of security that your
business will be around for the long term. In the event of death or ill
health of a partner or shareholder, the business continues to
trade providing longer term stability. Becoming incorporated also
allows you to transfer ownership of your business easily and
aids in putting a valuation on the business. Becoming incorporated also
facilitates easy introduction of retirement plans and insurance
schemes.
Once incorporated, the
business is governed by its Board of
Directors.
The Directors are elected by the shareholders, who then
act as agents of the company on behalf of the
shareholders. The directors are
authorised to act and sign on behalf of the company,
allowing the company to own property, sign contracts,
employ people and pay taxes as an independent legal
entity.
Incorporation Law dictates that the company forms bylaws
to govern its operation which are approved and
implemented through the voting of
shareholders.
Business tax rates are much lower than personal
tax rates, although there are issues of double taxation
to consider.
An incorporated business though can carry forward any
losses to the next financial year to offset against
future profits.
When choosing the state of incorporation for
your business, you need to consider the different laws and
taxation regulations of each state, and how they will benefit
or disadvantage your business. Usually it is a choice
between your home state and the State of Delaware, which offers
significant tax advantages.
As the owner of a small business, you may be
considering whether to incorporate or not. Previously, whilst
attracted by the tax advantages and reduced personal
liability of becoming incorporated, you may have been put
off by the legal costs involved.
How To Incorporate
The latest Business Corporation Act has now made
the process of incorporating your business much simpler
and quicker than it used to be. You now have the
much cheaper and easier option with the internet to
Incorporate
Online ...
to download the forms needed for online incorporation, click on
our Incorporation Forms
page.
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