Starting A Corporation
Has your small business
grown to the point where you need to think about incorporating it?
Starting a corporation can be a daunting
task, with seemingly endless legal requirements to meet. But business
incorporation does not have to be that complex, there are lots of DIY Incorporation kits available online, or
Incorporation specialists who will perform the service for you.
Hopefully when you had read
the information available on this site, you will have a better idea, of firstly, whether you should incorporate
your business now, and secondly whether it is a task you want to do yourself or alternatively pay a professional
to do for you.
Starting a corporation is
about giving your business it’s own separate legal entity. Prior to incorporation, you as the proprietor are
personally responsible for the company’s debts and liabilities, meaning that should your business start to
struggle, your own personal assets will be under threat.
By making your business a
separate legal entity, your personal assets are protected by what is known as the veil of
incorporation. Once incorporated, you become a
shareholder of the company rather than owner, and as such the only amount that you have at risk going forward is
your personal share capital investment.
As well as protecting your
own personal assets, an additional significant benefit of giving your business its own legal identity is that it
makes it easier to value the company, and to attract new investment to help fund the growth of the business.
Having a share structure allows shares to be issued to raise capital, and makes transfer of ownership
The main disadvantages to
incorporation are the additional legal reporting requirements and statutory regulations that have to be adhered
to. Your own freedom to more funds in and out of
the business is also severely restricted.
Having decided that starting
a corporation is right for you, you need then to decide on the type of legal entity you want your new company to
be. For example, do you want your company to be an
S-Corporation or an LLC? We'll discuss legal structure options available to you later on.
Another important decision
that needs to be made right at the start of the process, is the state in which you incorporate. Many
companies choose Delaware or Nevada rather than their own state as there are significant tax advantages in those
states. You should take professional advice as to
the exact benefits those states offer compared to your own.
When you have made the
decision as to the state you will incorporate in, you need to check with the registrar in that state that your
preferred business name is available for you to register.
You will have to decide on
the share structure of your company, and how much and what type of stock will be allocated to the owners in
return for their capital investment. It is highly
recommended that you take advice from a financial professional prior to making capital structure
As stated earlier, when you
are starting a corporation you can incorporate your business in several different ways. Once you have sought the relevant professional advice recommended
above, you could:
incorporate offline by completing all of the necessary statutory incorporation forms offline
Online using the services of an online incorporation service specialist
- Use a qualified
legal professional who specialises in business incorporations to do it for you
Above are all the important
decisions you need to make when considering whether or not starting a corporation is the right way for your
business to go.
If in doubt, your are
advised to always seek professional advice on all legal, taxation and financial matters affecting your