Incorporation

The most popular way of doing business worldwide involves setting up a commercial entity known as a company. Referred to as incorporation, this process can differ significantly depending on a country or jurisdiction. However, there are some similarities as well. 

Incorporation is all about safeguarding an owner (owners) of a business against the risks/liabilities associated with it. Incorporation also has other distinctive pros which include raising funds by selling shares, having to pay fewer taxes and being able to easily transfer rights of ownership. 

Companies having ‘incorporated’ status are required to have Articles of Incorporation identifying their core activity, the number of shares & their class.

Incorporated companies must have an office, either a virtual or physical one, which is located in a jurisdiction of their incorporation. They are also required to have proper banking credentials entitling them to engage in this line business and pay all due taxes. 

It is stakeholders that own companies, and depending on a company’s size, they can either include one or multiple stakeholders.  

The only liability that stakeholders have is paying for the stakes that they own. Owning stakes bings them a share of the company’s proceeds, which is referred to as dividends. 

Stakeholders’ responsibility includes electing members of the company’s board of directors. The latter are responsible for running the company and making sure that its interests are met at all times. They will not be held personally liable for the company’s debts, providing they have not perpetrated any fraudulent acts.

Being incorporated ensures a kind of ‘armor’ which is frequently referred to as ‘corporate veil’. It enables companies to take risks and secure further growth without putting the stakeholders & directors in jeopardy. It means that their the amount of their financial liabilities will be proportionate to the amount they originally invested.