Incorporating a business is a relatively simple process that often goes overlooked as a way of creating solid foundations for growth at small or medium-sized companies.
Incorporating has a number of benefits and advantages for individuals or teams leading a small business, not the least of which is that it leads your company to be taken more seriously as an organisation moving forward.
As with every aspect of business development, incorporating should be approached diligently and with a full appreciation of the details involved. Here are some tips to have in mind as you approach the incorporation process:
1. Decide if incorporation is right for you
This has to be the starting point for anyone considering their options with regard to incorporation. Objectively speaking, the process is primarily beneficial if you, as a business founder or director, are keen to avoid the prospect of having your personal assets or belongings seized in the event that your company starts to struggle or fail financially.
If you are happy to keep your own and your company’s finances entwined then there is probably no need for you to incorporate your business. However, if you want to access new potential routes to funding and to create a new legal entity then incorporation is for you.
2. Identify your shareholders early
A corporation operates on the basis of having shareholders in place at the top to oversee and assess all other aspects involved in running a successful and profitable business. It is possible for a single individual to be the sole shareholder at a company but having more people with smaller holdings allows you to raise money to invest in your business in any relevant way.
The important point though as you approach the process of incorporating is to decide early on who your key shareholders are going to be and to make sure there is transparency about what’s going on every step of the way. Remember that your shareholders will ultimately have to agree to the appointment of company directors before your company can be officially incorporated.
3. Hire an attorney to help draw up your paperwork
However good you may or may not be in handling paperwork, it will usually make your life a lot easier to enlist the services of an experienced attorney as you come to incorporate a company. This is particularly true in the context of drawing up Articles of Incorporation, a process which varies from state to state and entails a considerable amount of detailed form filling.
The articles of incorporation essentially inform the state you will be headquartered in of certain key details about your company and the work you intend it to carry out. It’s certainly possible to complete all the relevant documentation without the help of an attorney but the costs associated with fixing any errors could well be greater than hiring specialist help in advance.
4. Seize the moment to reward key staff
Regardless of the reasons behind a decision to incorporate, the process should be viewed as an important milestone and as an opportunity to reward key contributors to the progress you’ve made. Talented individuals are always likely to be in demand elsewhere and potentially by some of your keenest rivals. So can be smart for business leaders to award equity shares to their most valued staff during the incorporation process as an incentive to stay and work towards the continued improvement of the company.
5. Get advice on taxation issues
Once you’ve incorporated your organisation and created a new legal entity, you are obliged to inform the IRS of your corporation’s existence and apply for a new tax status. This process is straightforward enough but it can be well worth getting help and advice from accounting experts in order to remain fully aware of all and any pertinent issues relating to taxation.
By getting the right support at the right moments, it is easier for company directors to focus on doing more of what they do best and what got them to the point of incorporating a new business in the first place.