Business Incorporation
Posted on Wednesday 20 May 2009
Importance of Business Incorporation
Businesses form the backbone of any country’s economy. Countries create various legislations to promote investment and create employment for its citizens. When forming businesses, there are various procedures involved that investors must follow in order to have their business conform to the pre-set structure of the country.
Types of Business Structures
Before establishing a business, you must first decide on the type of business entity they wish to establish. The type of business you wish to establish determines how the government categorizes it and the level of liability and taxes prescribed. Investors can choose from several business structures. These include:
• Sole Proprietorship: In this structure, one individual owns and operate the business. This sole individual accepts all liabilities, debts and obligations incurred by the company.
• Partnership: This is a business owned or managed by two or more individuals. Both individuals bear evenly all liabilities and obligations of the company.
• Corporation: This is an organization that is owned by shareholders. They appoint a management team to operate and manage the daily functions of the organization.
• S Corporation: This is a special format of business established through the tax election system. The design of this structure ensures shareholders do not incur double taxation.
• Limited Liability Company (LLC): This business structure provides limited liability protection to the principals of the organization.
• Non-Profit: These are organization engaged in public service. To maintain this status, these organizations cannot post profits to their principals. These organizations enjoy may tax exemptions from the government.
• Cooperative: These are organizations created by individuals and operate to serve the interest of these individuals.
Incorporating a Business
The incorporation of a business is a simple process. However, each type of business structure has specific forms and criteria to which they must conform. These include meeting the requirements of the IRS, making yearly declarations of income and expenditure and producing minutes of yearly board meetings. Applications are made to the state’s secretary of state and the company upon approval is awarded a certificate of incorporation.
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