Is There a Need to Incorporate Your Business?

2007-03-08 10:33:40

( Business )



The first question you need to ask is whether there is a need to incorporate. You need to understand how different types of company formations operate, as well as the advantages and disadvantages of each.

Corporation vs. Other Types of Company Formation

In a sole proprietorship, you are your own boss. It is the simplest business to form and operate. However, this type is also very limited in resources and ability to generate more capital. You are completely liable for all of the financial obligations of your business, and if you are unable to service all your debts, your creditors can tap into your personal properties as well. You are also directly responsible for paying taxes as well as addressing any legal issues concerning your business.

A partnership is similar to a sole proprietorship in terms of ease of formation and unlimited liabilities of partners. In addition, any obligation of one partner will also legally bind the other partners. And in case the relationship among the partners turns sour, they have to close down the business first before taking on new partners.

In contrast, ownership in a corporation can be changed anytime with the consent of the stockholders. Stockholders of a corporation are not personally liable for its debts. A corporation can also easily raise capital by simply issuing more stocks. However, the steps in incorporating your business are more tedious and expensive than those of the sole proprietorship and partnership forms.

There are several steps and requirements you need to incorporate.

How to Incorporate Yourself

A corporation needs stockholders in order to exist. There are also documents you need to incorporate your business, such as the Articles of Incorporation and By-Laws. You need to name your corporate officers, and how much paid-up capital stock you are starting with. You also need a business name followed by "Incorporated" or "Corporation" or their abbreviations.

You can incorporate your business in any state, but each state has its own rules regarding incorporation as well as taxation of your business's profits. For instance, when you incorporate in Delaware but are doing business in another state, Delaware does not charge you any income tax.

Nowadays, the process is much easier because you can incorporate online. There are also online sites that aid you in preparing the necessary paperwork you need to incorporate your business.

Being aware of what you need to incorporate your company, as well as the pros and cons of incorporating, will aid you in making that all-important business decision.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.