Incorporating the business can turn an enterprise into a separate legal entity from the owners. A business turned into a unique legal person with rights and liabilities. The business owners have limited liability for the activities of the company. Distinguish from a general partnership or sole proprietorship by the company incorporation singapore alternating business forms.
The incorporation process is complex and it involves various legal steps. The steps are followed to ensure a business is properly recognized and registered by the government.
Company incorporation
Legal entity creation
An incorporated company is a legal entity separate from its owners. An incorporated company means:
- entered into contracts
- sue and be sued
- own property in its name
The legal separation will protect the assets of the owner if the business is sued or when bankrupted. An incorporated business is possible in some situations, such as:
- selling company shares to investors
- providing additional capital to grow
- expansion
Separation of personal and business assets
Incorporating a business is the separation of business assets and personal assets. The owner’s assets can be at risk when a lawsuit or bankruptcy happens when a company is not incorporated. The assets owned by the company are the only ones at risk. A separation of personal and business assets is essential to industries with high risk of lawsuits, such as:
- construction
- healthcare
The owners protect their personal assets from being seized in case a lawsuit is filed in an incorporated.
Why incorporate a business?
Incorporating a business provides several benefits to the business owners, not only for its personal assets, it also includes:
Limited liability
Limited liability protection is guaranteed in an incorporated company that makes business owners decide to get company incorporation. The shareholders are not personally liable for the company’s debts and obligations. Shareholders’ assets become protected when the business goes bankrupt or sued. They are liable for the amount of investment in the company.
Tax advantages
Incorporating a business provides some tax advantages. For instance, corporations are taxed at a lower rate rather than individuals. They can deduct business expenses, such as:
- salaries
- bonuses
- employee benefits
Corporations retain the earnings and can reinvest in the business which reduces the taxable income amount.
Enhance credibility
Incorporating a business can boost its credibility, keeping it operating. A company is viewed as a separate legal entity when it is incorporated. It is easier to attract customers and investors. In addition, incorporating the company provides legitimacy and professionalism to help stand out from the competitors.
Easier access to capital
Incorporating a business makes it easier to access the capital. Corporations issue stock to grow funds, this is a very attractive option for investors. Banks and other lenders can be more willing to lend money to an incorporated company than a sole partnership or proprietorship. Also, it helps a business expand and grow globally.
The incorporation process of a company is complicated, especially if you don’t know where to start. So, hiring the right professional to work on this helps lessen the process.
