Create an Incorporation

 CHARACTERISTICS OF A CORPORATION

• An Incorporation enjoys a distinct legal entity, separate from its owner(s)
• Directors and Shareholders have limited liability for the Corporations debts, liabilities and acts*
• A Corporation is not dependent on the life of any principal and will not be affected by changes in its members
• A Corporation can own property, carry on business, incur liabilities, sue and be sued
• A Corporation may be offered greater sources of capital than other business forms
• Corporations can issue shares to raise capital, which attracts investors.
• Raising money is usually easier than for Sole Proprietors
• Incorporating can mean lower tax rates
• Incorporating may create an opportunity to carry forwards losses of previous years to offset future year profits
• Incorporation will help your business gain credibility and prestige
• Some suppliers (and customers) prefer to deal with incorporations rather than sole proprietors
• Details of the Company's operations and relationship between parties is laid out in the Corporate By-Laws
• A Shareholders Agreement should be prepared, outlining shareholder rights and obligations
• A Corporation is required by law to maintain records, hold meetings, elect directors and provide shareholders with certain information
• The initial start up cost is expensive as compared with other business formations
• Income generated by the corporation is taxed at a Corporate level.  Money taken out by principals is taxed at at the personal level*
• Selling shares of the corporation is usually restricted and will require consent of the Board of Directors

 *These can potentially provide the greatest benefits

MAKE SURE TO KEEP YOUR CORPORATE DEALINGS SEPARATE FROM YOUR PERSONAL

As mentioned, theoretically, Director Liability is limited to the amount invested, but to lessen the likelihood of additional liability corporate directors and shareholders should:

Always use the corporate name in business dealings. The name of the corporation should be used in full, including “Inc.” or “Corp.” on all contracts, invoices, or documents used by the corporation

Always use the proper signature. This means that you sign on behalf of the corporation, with your name under the corporations with your title. The following format is an example

                                CORPORATION NAME

                                Per: ___________________________________

                                      Your name – authorized signing officer and corporate title

Follow all corporate formalities. This includes following bylaws, issuing stock properly, holding meetings of the Board of Directors, recording the meeting minutes etc. 

Make sure to keep funds separate. OPEN A BUSINESS BANK ACCOUNT.  Corporate funds and the funds of individual shareholders should not be in the same accounts or combined for any reason.  

Make sure to keep taxation separate. The company taxes should be paid entirely from corporate accounts and separate tax returns filed for the corporation                                                                                                                                                                                                                                                                                                                                                                                                                       

All transactions made by the corporation should be clearly separate from any individual transactions. Essentially, by never blurring the line between individual shareholders, owners or the Board of Directors, and the company (which stands as a separate entity), you run  Less risk of any personal liabilities for the debts of the business.