Recent law amendments all over the world nowadays have made new generation small business entrepreneurs more eligible to legally become a separate entity. Company incorporation means less liability of the owner and that he is entitled to deal with the court and share the responsibility with other partners.
Incorporating a business means transferring your legal structure from a single-owner into a corporation of multiple owners and board of directors.
Company incorporation may be easier than you think.
The process is done in person or through a legal firm to file some legal documents and takes a few steps that we will go through thorough in this article.
Of course, such a transformation has its advantages and its drawbacks as it is a decision to wisely consider when planning your legal structure.
Legal structure is how you want your business to be presented publically.
You can have a single ownership legal structure, for instance. Or a single shareholder corporation where all the liability is in the hands of a single shareholder and the company’s capital and finances are merged with your own finances and bank accounts.
Corporation legal structure, represented by the abbreviation Inc., operating as a corporation means shares are purchased by a number of directors, i.e. shareholders, whom are together the owners of the entity with percentages concealed in the contracts made. And they are all responsible for its operation.
Whether to transform into a corporation or not is a decision a single partner needs to make only after considering many aspects to assure he is ready for such a step at the current time of his business’s timeline.
Why Transform into a Corporation
1. Liability
Instead of the personal liability of the business’s debts and obligation are a burden on a single shareholder, it will be a burden of a corporate entity totally separate from personal finances and accounts. Thus protecting the personal finances.
2. Raise capital
It is much easier to raise capital for further investments in your business in a corporate structure than a personal entity.
That is accomplished by transferring stocks to other investors after the company incorporation to help raise capital.
3. Life of the business
The life of a single shareholder business is directly tied to the life of the shareholder. But in corporate structure, the business has an unlimited life and is not affected by the presence of any of the shareholders.
4. Legal position
It is more stable to file cases and seek legal court advice with the corporate entity.
5. Operations
The company’s operating procedures and decision making are shared among the board of directors members.
The diversity of different backgrounds and personal evaluation for each member helps run a better business.
6. Transfer ownership
Transferring ownership is simple with corporate entity through selling the shares to different holder/holders.
The Drawbacks of Company Incorporation
Formalities
Members of the board of directors have to go through a number of different formalities whenever a business decision needs to be made.
On the contrary, it could be done in a minute when the structure is solely owned.
Decisions like electing an executive director from the board members, legal issues, and operational major troubles all require setting up a meeting to discuss and make after considering all members opinions. Regular meetings have to also be assembled to observe and monitor operations.
Higher Capital
A higher capital is required to run in a corporate mode for the most costly items and expenses.
Taxes
As a corporate entity, it is a higher expense to be facing the taxes and such a burden.
How to Incorporate Your Business
Starting the process of company incorporation is challenging. It requires some gaps to fill in your business plan and additional legal documentation to submit through an attorney, legal firm or in person.
Here’s what you can do to fill in the gaps during company incorporation:
Decide the name of the new corporation
There are several guidelines to observe when choosing a suitable name for your company.
Avoid vulgar inappropriate names or the names that reflect or relate to something inappropriate in your culture. Choose the company name indicates the line of product offered by your company.
The purpose of the corporation
Think about the activity of the corporation, whether it is a continuation of the previous single shareholder principal activity or diversity of it or a whole new line of business.
The amount of the capital and type of each part of it
Some countries allow a corporation to start with a very low capital compared to other countries. For instance, it’s a good idea to choose company incorporation in Singapore.
Names of the shareholders and the percentage of their shares
There are few notes to consider when choosing partners for your company incorporation.
An ideal shareholder should be over 18 years old and not previously convicted of offending incident by any domestic or foreign court for dishonesty, crime, fraud or any other legal incident.
Shareholders have to honestly expose their previous experiences, street address, contact details, and any legal matters.
Privileges of each shareholder class
Each class or shareholders can have different privileges according to the number of shares owned.
The members of the director’s board
Not necessarily be the whole number of the shareholders, it is to be decided who are members of the board.
Location of the desired corporation
Note that by Singapore law, it is a must that one of the shareholders lives in Singapore. He must also be a legal personnel who was not charged by Singapore courts or convicted for any legal incidents.
Starting Up Your Corporation
Now that you know what a company incorporation requires, start by assigning roles of board members.
- CEO: Chief Executive Officer
This is the highest rank in the whole entity. The CEO is responsible for taking managerial decisions and can also be called the President.
- CFO: Chief Financial Officer
The CFO is a senior officer designated to take financial affairs decisions.
- Corporate Secretary
Despite the name, the job description does not contain any clerk or administrative work.
The secretary of the board of directors after company incorporation governs legal regulations of the structure mechanism of
meetings, shareholders, compliance, training, trustees, employees, insurances, etc.
Assign roles of each member, and create corporate internal regulation, rules and law.
Graph your corporate hierarchy, and start hunting for the fitting employees for each job post in the corporation with other members.
Mark a date after the company incorporation to regularly assemble a meeting for all the board members to discuss and plan the operations of the business. Assign investment channels and work upon fulfilling and gaining their long-term operation.
