Small Business Blog

     We will talk about incorporating a small business in this post.

     Procedure to Incorporate a Small Business

     The rules, regulations and procedures for incorporating any business remain the same. Be it a small proprietary firm or a large company. You as the authority in charge of the business and your firm have to complete some standard formalities. However, I will explain these formalities in the form of a procedure. This will give you a clear idea for incorporating a small business.

     Decide the Incorporation: The first thing you need to give a thought to, is to decide where you want to incorporate your small business. Whether you want to incorporate it with a multinational company operating in many countries, or with an organization operating within the state. Consider your current business volume and the estimated growth of your business. Evaluate these things properly and then decide the span of your incorporation.

     Indulge in an Agreement: The next thing you need to do is, sign an agreement before getting incorporated with the company. This is generally referred to as the pre-incorporation agreement. This is done in order to decide the board of directors and shareholding policies of the new incorporation.

     Filing the Application: When you are done with the pre-incorporation agreement, you need to file your application to register the name of your incorporation. The authority for the issuance of forms will be the Secretary of State’s office. Submit the form and the Secretary of State’s office will inform you whether the name you have applied for, has already been taken.

     Legal Formalities: Once the name is decided, following the Secretary of State’s office’s instructions, start preparing the articles for your business incorporation. You will be receiving an official certificate, which will include all the essential details of your incorporation. Read all the clauses and the entire incorporation agreement carefully and then sign the agreement. Take the signatures of all the authorities directly concerned with the agreement. 

     Meeting the Stockholders: Conduct a meeting inviting all the stockholders of the organization and discuss the corporate charter sent by the state. This charter will contain information such as the articles of incorporation, location of the business and also details such as reasons for incorporation.

     Electing the Board of Directors: It is necessary to appoint a new board of directors for the newly formed corporation. Election is the method by which you need to form the committee of directors. Inform the shareholders about this and conduct a voting session.

     Advantages of Incorporating a Small Business

     As a corporation now, you are liable only for the amount of money you have invested in the corporation, unlike in proprietorship wherein you were the only person responsible for anything.

     The existence of the corporation will never end. It would not get closed or dissolved even on the death or resignation of its shareholders, owners or any of the directors.

      Corporations help build business fast and are more reliable and stable than any other form of organization, due to their corporate identity.
In corporations, raising or producing funds for any project or business-related activities is not difficult, as here the corporation can sell funds and increase the equity capital.

     Disadvantages of Incorporating a Small Business

     As a corporation, you need to handle and maintain a lot of documents. These books include corporate law books, the share register, the director’s register and many other documents and records pertaining to the corporation’s business.

      Moreover, the cost incurred in registering, setting up and maintaining a corporation is costly.

     There is another tax return added to your tax. You will have two taxes, which includes tax on your personal revenue and the tax on your corporation income.

     Limited liability is one of the advantages of incorporating a small business. However, this may not be the case always. As, if the financial institution does not find your corporation eligible enough to repay its credits, it will often ask you to keep your personal assets as a guarantee to repay the money.

     Get more information here.