Incorporation Definition and Examples

The term incorporation refers to the process of forming and registering a limited business. Once the process is completed, a certificate will be issued. A limited company has a separate legal status from its owners. If you are self-employed, and your business is operating, it will not be legally considered a company until it has been registered and incorporated. You, the self-employed, are responsible for all liabilities and obligations incurred by your business until this is done.

Why should you choose incorporation?

By incorporating your business, you can create an organisation with limited liabilities. This means that any creditors to the business will not be able pursue you for any money owed. Once incorporated, a limited company can have directors and shareholders, and can employ people as well as make tax payments.

How do I arrange for the incorporation a company

Companies House is required to be used by any company that wants to incorporate in the UK to become a limited-company. This is as per the Companies Act 2006. It doesn’t matter if the business is new or existing in the form a partnership, or self-employed venture. All cases require incorporation through Companies House.

Tradition dictates that an incorporated business should have the words “limited” or the letters Ltd or Inc after its name. However, this is not a requirement. If it isn’t in line with their branding, many companies will drop the suffix Inc. For example, Apple Inc was the name of the company that was officially incorporated, while Microsoft Corporation is the official name.

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Incorporation has many benefits

The most common way to run a business is through incorporation. While the details may differ between jurisdictions, the benefits of incorporation are generally the following:

  • Any business liability can be used to pursue any owner’s assets, including their home.

  • It is easier to transfer ownership to another party.

  • Many times, incorporation allows the owners of a business to get a lower personal income tax rate.

  • After a business is incorporated, its owners can sell stock to raise capital.

The incorporation process

Articles of incorporation are required to start a business or incorporate an existing one. These documents state the purpose and location of the business. The articles should also include information about the stock being issued. For example, a small business may only have one shareholder. Larger businesses, however, are publicly traded with thousands of shareholders.

The directors of the company will be elected by shareholders. They will also be responsible for its day-to-day operations. The directors must act in the company’s best interests and are usually elected annually. The size of the company will determine the number of directors that are elected. Smaller companies may only need one director, while larger companies might require a number of directors.

Easycrop is the best incorporation service provider.

We Can Help

Contact our financial specialists if you are interested in learning more about incorporation or any other aspect your business finances. GoCardless offers recurring payments and ad-hoc payments .

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