What is the purpose of the incorporation process?

Answer 1

The incorporation process is what creates an entity separate from the individual. By filing for incorporation you register this separate entity with the state, and entitle it to do business within that state. Also, when someone files suit, they may file suit against Company LLC and the owner (assuming they've not engaged in fraud) is able to evade personal liability.

Answer 2

As a business grows and prospers, there may come a time when the owner decides that incorporation might offer better advantages than the existing business structure. Even a smaller start-up business may be best formed as a corporation from the beginning. If you consult with a business attorney about the business type, they can present the details about the legal aspects and advantages of incorporation over other forms of business.

With a sole proprietorship or partnership, the owners and partners assume all the risk and liability. Under incorporation, the owners and members are protected against personal risk and liability. There are tax advantages that bring increases savings to everyone, and incorporation allows the business to offer benefits like medical plans, savings and retirement plans to members and employees.

The ability to raise capital for operations is increased when the business is a corporation. You can sell stock to raise capital funds, seek investors and obtain credit as a corporation. The corporate shareholders benefit from not being liable for corporate debt. This makes it easier to sell stock and raise money for the business. The corporation is able to establish its own credit record and credit history.

Incorporation is not only for businesses; it can be used to create a government, a non-profit organization, or to create a club. Under the law, when a business operation is incorporated, it is viewed as a separate legal entity, as if it were a person. The corporation is taxed, and it can obtain credit and debt, buy and sell property, raise funds and otherwise perform as a person.

A corporation must establish by-laws and appoint a board of directors to run the organization. As a legal entity, the corporation is durable over time. It can survive the comings and goings or even the death of shareholders, corporate directors, and officers of that organization. Ownership may be transferred, and in some states transfer of ownership does not even require reporting or filing documents.

A business lawyer knows the current local and state requirements for incorporation. He or she is allowed by law to draft the documents needed for operational agreements, contracts and other legal documents that are required to establish and maintain incorporation of your business operation. They can help with name creation that meets all legal requirements and process registration papers for you.

If incorporation appears to be a good idea for your business, consult with your business attorney. There are some fees that vary by state, and each state has different rules for incorporation. Your business attorney will help your business get off to a good start through incorporation.