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Why should you be Incorporating your Business

A corporation is a separate legal entity in the eyes of the law. It is deemed as an artificial person and is separated from the founders and the people who continue to keep it running. A company can become a corporation by an incorporator, who has to file and provide the basic required information of the company. The requisite information comprises of the following -

  • Nature of the business
  • Names addresses of the incorporator(s)
  • Types of capital stock and their respective amounts
  • Prerogatives of the holders of the stocks

Where and How to Incorporate

Incorporation of the company is a major decision. A business is generally incorporated in the state where it operates. A businessman can choose any one state from the 50 states or the District of Columbia.

Except for the state where it is incorporated, the corporation is termed as a foreign corporation in all the other states. Transactions extending to other states will attract a certain number of formalities such as the registration of certificate of authority. Failure to comply the formalities will result in tax fines and penalties.

For the qualification filing, a foreign corporation must pay the state filing fees. These fees can be expensive. Moreover, a corporation has to adhere to taxes and other annual fees in all those states it wishes to operate.

Hiring an attorney for incorporation is the best recommended process. An attorney will know the do's and dont's of incorporating a company. Consulting an attorney assures you of professional expertise. Attorneys know the specifics of the process and can accomplish the task easily.

Merits of Incorporation -

  • Unlimited Life - A corporation enjoys an unlimited life and is not subject to an expiry in validity. Unless stated by the law, a corporation will never cease to exist.
  • Transfer of Shares - Through sale of securities, corporations can pass on the ownership easily
  • Corporate Veil - The owners are protected from the liabilities of the company, as the corporation is viewed as a separate legal entity

Demerits of Incorporation -

  • Formalities - Corporations are required to have annual meetings and are subject to taxes and annual fees.
  • Expensive - incorporating a company requires a lot of finance.
  • Book Keeping - There are various records to be maintained for a corporation. The paperwork can be tedious.
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