What is Company Incorporation?
The laws in the United States of America relating to sole traders, partnerships and companies are all diverse and somewhat confusing. It is important to know that the level in which you are taxed at will depend on your trading structure. Are you a small business owner and thinking of company incorporation?
There are a lot of things that you need to take into consideration before business incorporation! When a company is incorporated in the United States of America, it must file something called the Articles of Incorporation with the state in which it resides. Articles of Incorporation are the principal set of regulations that govern the way a company is managed in the United States of America.
The Articles of Incorporation will vary widely from corporation to corporation and even from jurisdiction to jurisdiction. So it is important to know what is listed in your company's Articles of Incorporation. They usually go through the essentials of your corporation.
What is a Company?
A company is a legal entity that can have members who own it (usually called shareholders) and people who run the corporation (known as directors). It is important to know that a shareholder could be a director and a director could be a shareholder of the same company.
A company is an entity that is separate from its members. When forming a company, you are in effect, forming a legal 'person' that is able to do a lot of things that individuals can do. A company can own property, sue and be sued and even enter into and sign contracts.
As you can see, a company is much like a person, a totally separate legal entity. So you are probably wondering why some people bother spending money to create a company if it has basically the same right as an individual - there are numerous benefits of incorporating your business. Find out why a lot of people are turning to business incorporation.
Some of the Benefits of Business Incorporation
There are heaps of reasons why businesses choose to incorporate. A business will incorporate mainly for financial protection. This means that ultimately the owner of a company is pretty much free from any of the liabilities of the business itself. Sounds pretty good doesn't it?
Now compare that to a partnership - did you know that each of the partners to a partnership is subject to unlimited personal liability when it comes to any debts of the partnership? That's not really fair is it?
An additional reason why a lot of small businesses choose business incorporation is because as a separate legal entity, a company will continue in spite of the death or incapacity of any of its shareholders - this giving a sense of eternal existence.
This seems to appeal to a lot of small business owners, knowing that someone will take over when the time comes.
Disadvantages of Business Incorporation
Just think about the increased amount of paperwork! Before incorporating your business, please keep in mind that there is heaps more paperwork to be done to help maintain a company, compared to a sole trader or partnership business.
This includes keeping a minute book, ensuring that all the relevant documents are kept up to date all the time, organizing and carrying out annual shareholder meetings and do not forget the extra Tax Return you will need to prepare! Another disadvantage of incorporating a small business is that obviously a company is rather expensive to set up.
The main reason why a company is more expensive to set up is simple. A company is a much more intricate legal entity than a sole trader! So naturally it is more expensive!
Incorporating your small business will cost you anywhere in the hundreds of dollars - and that only sets up your new legal entity. You need to speak with your lawyer and accountant - they will be able to go through your finances and what will be legally and financially best for you.
You have probably heard of LLC formation but probably do not really know what it actually is and how it works.
What is a Limited Liability Company?
A limited liability company is neither a partnership nor a corporation. Instead, a limited liability company is an unincorporated organization structured under State Law. A limited liability company is a distinct business structure that proposes an alternative to the usual sole trader status, partnerships and even companies by combining the company advantages of the limited liability together with the partnership taxation advantages!
Now that sounds too good to be true! Thinking about LLC formation?
Do not jump into the deep end yet! So what's best for you? It is a case by case situation. Only you will know what will work best for you. You should speak with your lawyer and get some adequate legal advice as to which option is most suitable for you and your business needs, as well as being able to help incorporate your entity.
There are a lot of things that you need to take into consideration before business incorporation! When a company is incorporated in the United States of America, it must file something called the Articles of Incorporation with the state in which it resides. Articles of Incorporation are the principal set of regulations that govern the way a company is managed in the United States of America.
The Articles of Incorporation will vary widely from corporation to corporation and even from jurisdiction to jurisdiction. So it is important to know what is listed in your company's Articles of Incorporation. They usually go through the essentials of your corporation.
What is a Company?
A company is a legal entity that can have members who own it (usually called shareholders) and people who run the corporation (known as directors). It is important to know that a shareholder could be a director and a director could be a shareholder of the same company.
A company is an entity that is separate from its members. When forming a company, you are in effect, forming a legal 'person' that is able to do a lot of things that individuals can do. A company can own property, sue and be sued and even enter into and sign contracts.
As you can see, a company is much like a person, a totally separate legal entity. So you are probably wondering why some people bother spending money to create a company if it has basically the same right as an individual - there are numerous benefits of incorporating your business. Find out why a lot of people are turning to business incorporation.
Some of the Benefits of Business Incorporation
There are heaps of reasons why businesses choose to incorporate. A business will incorporate mainly for financial protection. This means that ultimately the owner of a company is pretty much free from any of the liabilities of the business itself. Sounds pretty good doesn't it?
Now compare that to a partnership - did you know that each of the partners to a partnership is subject to unlimited personal liability when it comes to any debts of the partnership? That's not really fair is it?
An additional reason why a lot of small businesses choose business incorporation is because as a separate legal entity, a company will continue in spite of the death or incapacity of any of its shareholders - this giving a sense of eternal existence.
This seems to appeal to a lot of small business owners, knowing that someone will take over when the time comes.
Disadvantages of Business Incorporation
Just think about the increased amount of paperwork! Before incorporating your business, please keep in mind that there is heaps more paperwork to be done to help maintain a company, compared to a sole trader or partnership business.
This includes keeping a minute book, ensuring that all the relevant documents are kept up to date all the time, organizing and carrying out annual shareholder meetings and do not forget the extra Tax Return you will need to prepare! Another disadvantage of incorporating a small business is that obviously a company is rather expensive to set up.
The main reason why a company is more expensive to set up is simple. A company is a much more intricate legal entity than a sole trader! So naturally it is more expensive!
Incorporating your small business will cost you anywhere in the hundreds of dollars - and that only sets up your new legal entity. You need to speak with your lawyer and accountant - they will be able to go through your finances and what will be legally and financially best for you.
You have probably heard of LLC formation but probably do not really know what it actually is and how it works.
What is a Limited Liability Company?
A limited liability company is neither a partnership nor a corporation. Instead, a limited liability company is an unincorporated organization structured under State Law. A limited liability company is a distinct business structure that proposes an alternative to the usual sole trader status, partnerships and even companies by combining the company advantages of the limited liability together with the partnership taxation advantages!
Now that sounds too good to be true! Thinking about LLC formation?
Do not jump into the deep end yet! So what's best for you? It is a case by case situation. Only you will know what will work best for you. You should speak with your lawyer and get some adequate legal advice as to which option is most suitable for you and your business needs, as well as being able to help incorporate your entity.