You have probably heard or seen a lot of companies with the letters “Inc.” attached onto its name. There are not just there for decoration or to sound important. They have a real purpose and you have to do the paperwork to earn it. Incorporating a business helps to remove some of the company’s liabilities and responsibilities off of the shoulder(s) of the owner or the partners. It also helps the company to continue on even if the company suffers loss or the death of its members. Here is a list of some of the aspects of incorporating your business.
- Exists As A Separate Entity
A corporation is considered separate from its owners. Unlike a Limited Liability Company, the owners do not take responsibility for the mistakes of the company. Taxes must be filed separately for the owners and the corporation itself. In addition, if the company has any financial problems, you will not have to own up to them. Not that you are now free to do wrong or anything, but if your corporation has a bad year or is in debt, the money will not come out of your pocket. It will, however, reflect badly on the company as a whole and you may lose investors because of it. That is just as bad as losing money. - Your Corporation Will Outlive You
Normally with a LLC, the company is limited in its existence. If one of the members dies, goes bankrupt, or removes him or her self from the company, it will dissolve. However, if the remaining members agree to keep it running, it can. After incorporating your company, you can rest assured that it will not die. It has the ability of existing beyond the deaths of the owners, shareholders, directors, officers, and other members of authority at the corporation. No voting is required to keep it alive. It will breathe on years after its former members have passed away and your dream will live on with it. - Formal Corporate Inner-workings
Along with living forever and existing on its own, you will also be required to add to your payroll a few more members to the company. From now on, you will have board directors, annual board meetings, and corporate officers. All of these members are required by the General Corporation Law. You will also need shareholders. Now, there can be only one shareholder but they may have to take on the responsibility of being a director and all of the officers for your corporation. You will also need to maintain books and records of all proceedings within your company. These records will have to be kept separate from your personal bookkeeping. (Remember that the corporation is its own entity).
Now that you know the basics of incorporating your business, are you ready to try it? Be prepared for a lot more paperwork in order to apply for incorporation. Generally, you should incorporate under whichever state you will be doing business in. Out-of-state incorporating can be pricey and may require that the company qualifies to do business in the other state. You will also have to pay separate fees for the out-of-state incorporating as well.
To help you with incorporating, you will have to add another member to your organization: a registered agent. He or she is the one responsible for filing the paperwork, receiving official documents and materials, and may act on behalf of your corporation. Please note that this agent must reside in the state of incorporation but can exist at an address other than your business address (but not a PO Box).
By Tamara C. Jude