Business owners always have a desire and a goal to keep improving their business. They constantly try to come up with ways that will initiate the growth of their business. They have always tried to find out how they can take their business to the next level. One of which is business incorporation. This article will guide you through how to incorporate a business and what you will need in order to achieve it for your own business.
To incorporate a business means to give your business its own body. Incorporating a business is separating your business identity from your personal one. You are no longer just a business; you are a company - a corporation. This creates an artificial and legal entity that is separate from you as an owner. It is now a legal person who, just like you, can buy and own properties under its name, bring and be the subject of lawsuits, be taxed, owe debts and liabilities, and earn its own profit. Therefore, it is a level up for any business. By incorporating a business, you are protecting yourself from any debts and liabilities that your business incurs while still getting a portion of the profit that it earns. Some other benefits of incorporating a business are:
Personal assets are protected. You do not need to use your personal assets (cash, property, etc.) to cover any expenses, debts, and liabilities that the business incurs on its normal course of operations or even when extraordinary circumstances (lawsuits, disasters, etc.) occur. Because your business is a completely separate entity from you, you would not be as directly affected and liable as when you were only a sole proprietor.
Enjoy certain tax benefits. Corporate taxes to be paid can be significantly lower than what you use to shoulder as your own sole business owner. When you incorporate a business, you also enjoy certain deductions and other tax benefits. As you are only one of the many owners, you will just be taxed according to the share of profit you would receive from the corporation.
Your business has an unlimited life. Corporations are own separate entity, so it has its own life. This means that it does solely depend on your life in order to continue to exist. It will only cease to exist if it reaches the point that it has reached its objectives, or has gone bankrupt, or has merged with another. Incorporating a business also makes it easier for you to pass the business to your heirs since it allows for easy transfer of shares or ownership.
Easier to raise income and capital. Because of its size and the additional investors, as compared to only you as an investor, it has a bigger amount of capital that it can use in its operations. This means that it will have more resources to earn a much higher profit. It can also engage in more activities and take more risks that might make it grow larger than it currently is.
Enhanced credibility and authenticity. When you incorporate a business, you give it its own identity. This significantly affects the brand image that your business has. By allowing it to be its own person, you dissuade the doubt that any customer may have about your credibility and authenticity. As a corporation, the business has a higher amount of capital to support all investments and improve production. Business incorporation also gives more confidence to your creditors and investors, since you are more likely to be able to pay them in full.
While requirements vary in different locations, these six things are usually among the list of what you need to have when you are incorporating a business.
Incorporators are the people that form the corporation. While there are one-person corporations, usually it takes more people to incorporate a business. Nevertheless, whether you decide to just fly solo or get more investors to go through the process of business incorporation with you, the existence of incorporators just means that a decision has to be made to incorporate a business.
2. Articles of Incorporation
Articles of incorporation is a document that signifies the existence of a corporation. This is the first document that needs to be signed and validated when you incorporate a business. This contains information about the incorporators, who the main decision-makers are, the name and purpose of the business, and the location and main office of the company.
3. Name of Corporation
Incorporating a business means that you have to come up with a name for it. The name of your corporation would have to be included in your articles of incorporation. And most states and locations would not allow you to register without a unique name and with none of the words “Corporation”, “Company”, “Incorporated” or any abbreviation of those words.
4. Business Address/ Home Office
Business address or home office is one of the information you have to put on your articles of incorporation when you incorporate a business. This refers to your headquarters, the home office, or the center of where you do your business operations. This also signifies the location of where your mail and other legal documents would be sent. This is also where your registered agent must always be located.
5. Registered Agent
The assigned registered agent is the one that will handle your legal documents as you incorporate a business. Their name must also be listed in the articles of incorporation. This gives them legal rights to receive important documents on behalf of the corporation which they would then forward to you and the other owners.
6. Business Licenses
Business Licenses are sometimes done after you incorporate a business. But some states require that you get them in order before they approve your business incorporation. These business licenses refer to the legal documents that give your business the privilege to operate and earn a profit.
7. State Approval
Finally, the last thing you need to incorporate a business is the approval of the state. Once you get this approval, then your business is officially registered as a corporation in the state you are located. Your business will be recognized and known not just as a business, but as a company as well.
What we gave you above is a list of the documents you need during business incorporation. In this section, we will give you some steps on how you will use the requirements above and how to incorporate a business.
1. Identify Business Owners
As mentioned above, incorporators are necessary as much as their decision to incorporate a business. Identifying who the incorporators or business owners have will begin your business incorporation. It will also make negotiations easier if you decide early on who the owners are and how much their share of the corporate ownership will be.
2. Decide on Main Office Location
Whether it is a warehouse or factory where all your business activities happen or a separate office in the city, you have to decide where your main office location is going to be. This will be the foundation of your company’s business activities, so you have to ensure that it is an optimal location. It is important as it will be where your corporation would receive important documents, accommodate clients, and hold business meetings. When you incorporate a business, your main office location will play a huge role in building your company’s identity.
3. Assign Decision-Makers
You also have to decide early on in your business incorporation who the main decision-makers are. An important thing to understand is that when you incorporate a business, its owners will not necessarily be the main decision-makers. It is decided by all the business owners who would manage the business activities. Keep in mind that not all business owners have to be involved in the decisions made in all the business activities. Especially so if your corporation grows bigger and you go public with its shares, which would mean that a normal citizen can own a small percentage of your corporation.
4. Prepare and Submit Necessary Documents
There are many required documents you need to handle, prepare, and submit when you incorporate a business. These requirements vary per state, but there will always be multiple documents that you need to take care of. It is important that you do this step completely and properly, so you will not have any problems in the future of your company’s endeavors.
5. Get Registered and Approved
Registration and approval of your business incorporation conclude incorporating a business. At this point, you have to secure the proof of registration and approval because it will be the documents that would give your company the credibility and authority to operate as a corporation. By incorporating a business and getting the approval necessary, you effectively create a legal entity that would be unique for your business and your business alone.
Incorporating a business involves a lot of processes and papers to manage and get a hold of. Nevertheless, it has been proven to be worth all the trouble. And if you are looking for a way to take your business to the next level, then business incorporation might just be the right move for you. Do not focus on all that needs to be done to incorporate a business, but keep in mind all the benefits that would come when you successfully accomplish such a feat. You would really do your business and yourself a huge favor when you go through the process of business incorporation.
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