It's essential to distantiate yourself as far as possible from being potentially held responsible should something go wrong when it comes to business.

That's where business incorporation comes in. According to the attorneys at diamondlaw.ca, to incorporate your business, you'll need an experienced team with knowledge of representing all types of companies in a wide range of legal matters.

Incorporation is vital to the success of any company. Thus, it's necessary to discuss why every business owner should consider incorporation.

What's Business Incorporation?

A corporation, in the eyes of the law, is a legal entity. Thus, its shareholders are protected from personal liability. It can, in its own capacity:

  • File lawsuits

  • Be taxed 

  • Draw up contracts

  • Buy and sell property

  • Commit crimes

Incorporation is defined as:

  • An artificially formed legal entity existing apart from and separate to the people that created and managed it.

As little as one incorporator is needed to establish a corporation by applying for a charter with the respective state.

Why Should You Consider Incorporating Your Venture?

Even though operating a corporation has its drawbacks, its benefits are worth it. The advantages include:

  • It protects you, within limits, from personal liability for corporate obligations and debts. 

  • Your venture will qualify for tax deductions on a wide variety of operating costs, ultimately increasing profits.

  • The lifespan of the corporation isn't dependent on the life of an individual.

  • Your shares are transferable. Should you wish to move on, you can, at any time, sell, transfer, or give away your shares.

  • It enables you to raise investment capital by selling securities.

  • It adds credibility to the operations of your venture, uplifting your company's image.

  • It's the most appropriate vehicle for taking your company public.

Unfortunately, there are also some disadvantages, which includes:

  • It's more expensive to set up than sole proprietors and partnerships.

  • Periodic filings for annual fees with the state are required.

  • Directors and owners are required to observe certain formalities and attend annual meetings.

How to Incorporate Your Business

"File:Steel LLC facility, Scottdale, Georgia.jpg" by Thomson200 from Creative Commons

When incorporating your business, your initial priority is to contact the state office or secretary of state responsible for registering corporations in your region. They'll provide you with all the forms, instructions, and fee schedules you'll need. 

Although it's possible to go through the process without legal aid, it's not advisable. You can also use an incorporation service company to prepare and file the state's documents on your behalf.

One of the essential things needed to be done in the early stages of the process is to prepare the "articles of incorporation." A form that has to be completed by the incorporation service company acting on your behalf, your attorney, or yourself. The requested information includes:

  • Incorporators names and addresses

  • The proposed name of the corporation

  • The intended corporation's purpose

  • The location of the organization's principal office

  • Types and amount of capital stock to be issued by the organization

Furthermore, you'll need to draught a set of bylaws describing how your corporation will function in greater detail than the articles. This needs to include:

  • Names of the directors and shareholders

  • The responsibility of the shareholders

  • At which interval stockholder meetings will be held, etc.

You might be delighted to know that full-service law firms, such as Diamond & Diamond, have years of experience in drafting and preparing bylaws and other related documents, so it makes sense to always hire legal counsel when incorporating.

After submitting your documentation and waiting for approval, your certificate of incorporation will be forwarded to you by the secretary of state's office.

The Bottom Line

Even though it may be more expensive to incorporate your business, its protection makes it more than worth the cost. It makes it easier to raise the capital needed to accomplish specific goals that you couldn't possibly achieve on your own. With tax deductions exclusive to corporations, you can effortlessly increase the company's profits. 

With the pros by far outweighing cons, incorporation should be your next step forward.