What the Advantages of Incorporation of a Company for Your Business Structure

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Many businesses lean into the aspect of incorporating their operations because of their unspoken advantages. Some entrepreneurs are afraid of deciding on this structure because they wrongly assume that it entails more responsibilities and expensive costs. Interested to know what are the advantages of incorporation of a company? Read on below to understand incorporation better.  

What is the Process of Incorporation?

The incorporation process involves several voluntary members of the organization where everyone is united to form a new legal business entity. This legal entity is intangible and artificial.   

What are the Benefits of Incorporation?

Now that you consider how incorporation can help your business thrive, here’s a quick rundown of its benefits. 

  • Liability Protection

One of the greatest downfalls of startups that employ the single proprietorship structure is that personal and business finances get mixed up. If the company struggles to stay afloat, entrepreneurs will use their personal money to cover it up. Later on, the owner will realize that his personal savings are run dry. 

This scenario can be prevented through the process of incorporation. Incorporation allows the shareholders/owners to limit the liability they incur. Moreover, this process enables the shareholders/owners to protect their personal assets from foreclosure due to unpaid debts. 

If a business is incorporated, it can go bankrupt due to mismanagement of resources and funds. But, the shareholders/owners will not be personally liable for the losses. 

  • Increased Capital

Going through the process of incorporation raises your business’s credibility in the public eyes. Such trust can be used to garner public funds in raising the organization’s capital. How can an organization raise funds? By selling corporation stocks or borrowing money through financial institutions. 

  • Perpetual Existence

Unlike startups or businesses of single proprietorship, the incorporation’s legal framework allows for sustainability despite the death of its original incorporators. Single proprietorship tends to dissolve when there’s no one to continue the operations of the original owner. On the other hand, incorporation continues to exist because of its perpetual existence feature. 

Incorporation allows shareholders/owners to designate a focal person for management and operations should the original incorporators die. This advantage makes an incorporated business continue with its long-term goals without much hassle. 

  • Tax Benefits 

Depending on your country’s tax laws, there are instances when incorporating your company allows for savings on tax payments. For example, when a corporation incurs losses, it can be deductible to its financial statements. But, be careful and consult with a service provider in India when doing taxes to avoid penalties. 

  • Ease of Ownership Transfer

Through the sales of stocks, incorporation ownership can be easily transferred. However, when you transfer ownership from one sole proprietor to another, a new business license must be obtained. Aside from that, several processes and documents must be accomplished as proof of new ownership. 

How 3E Accounting Can Help

It may take some time to assess whether incorporation works best for your business. However, to understand more about how to incorporate company in India, communicating with professionals can do the trick. 3E Accounting is a proud accounting and business consultancy service provider that aids businesses to thrive and prosper. 

They are a corporate service provider in India that you can message for any business or accounting needs. If you’d like to know more about how 3E Accounting India can help your business excel, book a call or message them now! 

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