You have finally decided to open your own business that you had been dreaming about for a long time. One of the most important things you need to do is get your company registered, also known as incorporation. Company incorporation is the legal process of writing the company. It is then identified as an LLP, Inc, Ltd, etc. This process allows you and the world to differentiate the company from your individual. It signifies the company coming into existence.
The process of company registration involves the creation of documents that signify the company’s incorporation and registration legally under the law. It requires one to list and state the percentage of shares that the shareholders and investors hold in the company. It also separates the financial documents and legalities of the owner from the company. Some of the benefits include:
Benefits of company incorporation
- It separates the assets from liabilities. Thus the company’s owner’s assets are safe and distinguished against the company’s weaknesses.
- Since there is proper documentation of the company and its type, it becomes easy to hand over the company to someone else. It also protects the owners in case of co-ownership from any fraud by their partner.
- Since the money inflow is in the name of the company instead of in the name of the owner, the tax is borne on this income is usually lower.
- In case of lower money evaluation, the company can raise money by selling and trading shares on the stock market.
Company registration and incorporation involve creating and drafting certain documents known as the articles of incorporation. A lawyer can do this. The document states all the necessary details about the company. These details include the intention and function of the company, the sector it is going to work for/in, the location its headquarter will be made in, the number of shareholders and the percentage of shares they own, etc.
Usually, smaller companies may have a single or a small number of shareholders, whereas the more prominent and larger companies may have multiple shareholders. These shareholders will be mentioned in the company incorporation papers as they are the legal owners of the company. They bear the losses and the profits faced by the company and are also responsible for paying money for their shares. These shareholders play a vital role in the company’s investments and financial status. They also elect a director for the company.
These directors are responsible for the day-to-day functioning of the company. They direct the activities that the company dives in and are always required to have the company’s best interest in mind. There may be a single director who is the case in smaller companies or a board of directors comprising multiple people who all have a say in how the company functions.