The most common way of doing business around the world is the incorporation of a company. Incorporation is known as a legal process used to form a corporate entity that varies from one country or jurisdiction to another, although there are many common elements.
The main reason for incorporating a legal entity is to separate the owner or owners from the obligations and risks associated with their business activities. There are also other advantages to incorporation. Company’s capital can be increased through the sale of shares, the tax on the profits has been drastically reduced recently and is lower than personal income tax, and in addition the ownership can be easily transferred.
All registered enterprises require statutory documents that determine the nature of the business, the number of shares and the class of securities issued, if any.
All incorporated enterprises need a physical or virtual office in the jurisdiction where they are registered, as well as an access to local banking services for doing business and paying the relevant taxes.
Companies belong to the founders. Depending on the size of the company, there may be one shareholder/founder or there may be thousands of them. Shareholders are liable for the debts of the business according to the amount they have invested into a company’s shares. They benefit by receiving a share of the profits in the form of dividends.
Shareholders elect directors of a company, whose main duties are to effectively manage a business. The directors are responsible for the company, and they should act in the best interests of it. The directors are not personally liable for the company’s debts, unless a fraudulent activity on their part took place.
Corporate protection, as it is often called, is a protective shield that provides incorporation, allowing you to take risks in order to expand your business without jeopardizing shareholders’ and directors’ personal financial assets to the extent greater than their initial capital investments.