One of the things most business owners weigh when starting their business is the which they will choose to register.
Businesses can be registered as a sole proprietorship, limited liability partnership or as a corporation.
Company incorporation extends businesses some key advantages which are not accorded by a sole proprietorship or limited liability partnership structure.
Foremost among these key advantages is that a corporation is a legal entity on its own – which means it can legally enter into contracts and can be held liable for its own legal obligations. This structure protects the shareholders who will not be legally liable for the actions of the corporation.
Aside from this, company incorporation offers other benefits which are crucial throughout the lifetime of the business.
Such benefits include:
1. A Perpetual Existence
A corporation can exist as a legal body in perpetuity – which means that it has a limitless lifetime. Unlike in a sole proprietorship or limited liability partnership, when the sole proprietor or the partners die, the business dies with them too. In a corporation, the business can continue indefinitely even as shareholders die or leave the company. Company incorporation is advantageous this way because the business can continue to operate legally until it has accomplished all of its objectives, such as, but not limited to, expansions, mergers among others.
2. Easy Transfer-ability or Sale of Shares
In a corporation, shareholders are able to sell or transfer their shares to another individual, when they are no longer interested in their shares in the business. During the company incorporation, the clause on the transfer or sale of shares is drafted to be stated in the company incorporation document. Usually, this clause is found on the back of a stock certificate, where a shareholder endorses the instructions for the sale or transfer of his or her shares.
3. Investor Friendly
A corporation is the right business structure for businesses who desire to attract investors. Investors are usually more confident to put their money in businesses which have are a legal entity of their own precisely because of the key advantages identified above: first, they are protected from any legal obligation, which solely rests upon the corporation as it is a separate legal entity, and second, because of the ease on transferring or selling shares.
How do you know if Company Incorporation is right for your business?
There is no one right or wrong business structure as long as you are able to operate your business legally. So how do you know if company incorporation is the right business structure for you?
To answer this question, you’ll need to go back to your business plan or your vision for the business. How big do you want your business to grow? How fast do you want to make this growth happen? Do you envision employing many people, and operating your business in many locations both locally and overseas in the future?
If you answer yes to all these, then company incorporation is right for you.
Remember, company incorporation may come with additional and ongoing costs primarily on filing reports and compliance requirements so your company’s legal status is not compromised. Attending to these compliance matters will definitely take some of your time away from core deliverable such as business development or branding activities.
To help you focus on these core deliverable, it helps to engage the services of a professional company incorporation firm, from the time you decide to register your business as a corporation to the day it starts operating as such.
Looking at it in the long-term, company incorporation is a strategic business structure when you have your vision set on n a business that can grow big and a brand that will stay.