When you incorporate a company, you’re simply acknowledging its status as a separate and legal entity that’s recognized by law. This, in effect, exposes the company to certain privileges such as asset protection, asset transfer, low tax rates and a reputable credit rating. To achieve this status, however, certain measures have to be taken. Continue reading to find out:
1. State the Purpose and Type of Company
Every company has a product or service to offer. Therefore, it is important to ensure that your company does not indulge in illegal activities that might have some serious legal implications. The company’s capacity to carry out its activities also matters a great deal. This means that the necessary staff and machinery has to be considered. There are also different taxes charged for different products and services. You’ll therefore have to check with the relevant tax authorities to confirm this. There is also the scope involved in carrying out the operations. This will be dependent on whether you’re dealing with an LLC, a partnership or a corporation.
2. Choose Jurisdiction and Business Type
Every jurisdiction has permits required for any type of business. Moreover, jurisdictions have different rules and regulations regarding the type of company and the necessary start-up costs involved in setting up a business. There is also a lot of paperwork involved when it comes to acquiring the necessary licenses and local business permits. And to comply with the tax laws within your jurisdiction, there are some forms that one has to fill in order for the tax authorities to determine whether the business is qualified and accredited as per the law.
3. Choose Company Name
There are various rules involved when one chooses a company name. For instance, you can’t use a name that has already been taken over by another company within the same jurisdiction. Moreover, you must indicate the initials that are related to your type of company. If it’s a limited liability company, you can use the initials LLC or Ltd. Same case applies to corporations. As for sole proprietorship, this will be at the discretion of the owner. The business name, however, should not in any way use terms that require government approval. Terms such as insurance, government and so forth should be avoided. In essence, you can’t name your company “Joy Insurance Company Limited” or something similar since you’ll need government approval to do so.
4. State the Amount and Types of Capital Stock
Every company type has certain ways of raising capital stock. For instance, limited liability companies raise capital stock from member contribution. As for the corporations, however, you’ll have to state how they aim to raise the necessary capital stock. Information required can range from share per capital, share value, dividend per share and dates for the initial public offers. You’ll also have to state the percentage stake that each member and shareholder has in the company.
5. Appoint Directors and Hire Employees
Every jurisdiction has rules and regulations pertaining to the appointment of directors. But generally, when it comes to LLCs, members get to elect their directors. As for the corporations, the directors have to meet a certain competence criteria before they can be voted in by members and shareholders. Competence is also a key factor when hiring employees and there are jurisdiction guidelines for doing so.
6. Contact the Official Agent, Lawyer or Incorporation Service Company Dealing with Company Incorporation
Every jurisdiction has individuals and companies that offer incorporation services and legal advice that pertains to it. You’ll first need to complete and submit an Application form to the official agent/lawyer/incorporation service company and attach prerequisite personal documentation required by the law of your chosen jurisdiction. This will help them analyse the pros and cons of your company choice and offer the services needed to incorporate your company.
7. The Company Must Be Annually Renewed
The local permits and licenses you acquire in your respective jurisdiction are subject to a one year expiration date. Moreover, there are annual costs incurred when you patent the company’s name and identity since these are considered to be intellectual properties. Remember, a company is considered to be existent as long as it’s subject to the rules, regulations and legal fees of respective jurisdictions. Failure to which, its operations are deemed to be in breach of standard jurisdiction protocol.
From what we’ve discussed, it’s evident that company incorporation has an essential standard protocol that’s shared by jurisdictions worldwide. However, there are intricate differences involved which should be verified and complied with to ensure proper incorporation of the company.