WHY INCORPORATE COMPANY?
Entrepreneurs identify the relevant business organization based on several factors such as ease of commencing operations, compliance requirements and the costs involved, agreement with other members and need to raise funds.
A company is a voluntary association of persons generally formed for undertaking some big business activity. No other form of business gives flexibility as that of a company in scaling up a business.
A company is a voluntary association of persons, recognised by law, having a distinctive name, a common seal, formed to carry on business for profit, with capital divisible into transferable shares, limited liability, a corporate body and perpetual succession.
Following are the benefits of incorporating a company: –
- Organizing a business in corporate form allows a company to function independently from the owners of the business.
- It provides owners with personal asset protection. When a business incorporates, its owners have limited liability protection against the company’s debts and obligations.
- A protective zone of restricted liability that safeguards the interests of the company’s owners and directors. incorporated enterprises can absorb various risks that aid in the company’s and business’s growth without exposing owners, directors, and shareholders to financial responsibilities beyond their initial contributions.
- The incorporation of a company aids in the formation of a legal entity for the firm that is distinct from the legal entity of the stockholders, owners of the firm, and partnership companies.
- If shareholders exploit the company’s property for personal gain, they can be prosecuted for criminal misuse of the funds.
- An incorporated business has the liberty and independence to create its own rules and regulations, as well as how to apply them. These, however, are bound by equity norms, general legal principles, and moral conscience.
- Incorporated businesses are more than just about money. Businesses that are incorporated are thought to be more stable than those that are not. Increases the credibility of the company and adds solidity, permanency, and legitimacy.
- One of the most compelling reasons to incorporate a company is the tax advantages. The Income tax rate in India for certain class of companies ranges from 15% to 25%, fairly lower than that of Partnership firms/ or an LLP which is taxed at 30%.
Currently, the buzz word is entrepreneurship, and an entrepreneur needs to factor in the various advantages and risks involved while choosing the form of business. An appropriate business form goes a long way in deciding the future of the company. Incorporating business as a company provides security and enjoys far more credibility than other business forms.