When we incorporate a business, we actually set up a new corporation, in order to get many benefits which are offered by different government authorities, and also to benefit from acts related to companies. Small as well as large business houses can benefit from incorporation.
The most important advantage of incorporating your business is that, you will be liable only for the amount that you have invested in the company, and not the entire amount of any liability, which is the case for a proprietorship. This will naturally reduce your financial risk to a great extent. A corporation is an ever running body, and its existence will never end, even after the death of the promoters, or any major shareholders of the company. The company reserves the right to allot shares to some other party, in case a person resigns from the board and liquidates all his shares. As we all know, in today's day and age, generating enough capital has become a big challenge for several businesses. Raising money as a corporation is always easier than doing it on your own, this is because banks and leading financial institutions would prefer to grant loans to a corporation, owing to its financial strength. Protection of individual assets becomes much easier with the incorporation of a business. Claiming several tax deductions, establishing credibility with clients, (and) saving state and federal income taxes are some of the other advantages of incorporating a business. Incorporation can be one of the best business growth strategies for your company. Now, as we know its advantages, let us discuss how to incorporate a business in the next section.
Incorporating a Business
Though there are many people who can guide you in the process of incorporating your business, you need to be knowledgeable about this entire procedure. While you are incorporating a small business, you need to decide whether it is to be done with a large multinational company who has its operations in several counties, or a company having its reach only in a particular state. You need to think of your estimated growth in the upcoming years, and business volumes, before you take the final decision. The next step would be to sign a pre-incorporation agreement, which will decide upon the board of directors of your company. The shareholding pattern and policies of the corporation would also be discussed at this time. The third step is to file an application, so that the name of your incorporation gets registered. The name would be approved by the Office of Secretary of State. After you receive the name of your incorporation, you can start preparation of the articles of incorporation. Sign the agreement only after reading all the important terms and conditions. Finally, you need to conduct a meeting of all the stockholders and shareholders, to discuss with them all the rules regarding the incorporation in detail. At this point, you will have to appoint a new board of directors, by conducting a vote for the interested candidates. The individuals who get the most votes from the shareholders would be included in the board of directors.
Though understanding the guidelines is easy, implementing them practically requires patience and consistent efforts. Maintaining a lot of documents, and planning things in a systematic way, are the main challenges faced by an incorporated business entity. So, prepare yourself for these challenges and enjoy great business growth.