What is the process of incorporation? This page deals with the rules of incorporation.
Watch my specially selected playlist of many videos on different aspects of incorporation, including the rules. You can choose the one you want to see, by clicking on the arrows on either side of the screen:
Incorporation is the process of getting approval from the appropriate authorities of creating a legal entity - some kind of a 'corporation' to conduct business.
"A corporation is a legal entity, technically, a juristic person, which has a legal personality distinct from those of its members.
(v) to make by-laws governing its internal affairs.
(vi) Other legal rights and obligations may be assigned to the corporation by governments or courts. These are often controversial." Source: Wikipedia
Difference between a corporation and a sole proprietorship
The basic difference between a sole proprietorship and a corporation is that after incorporation the company becomes a separate legal entity and can act as an individual on its own behalf. The owner of the company can be one or many, depending on the percentage of shares they own in the company and are legally separate from the company.
Unlike in a sole proprietorship, in a corporation, its shares can be listed on a stock exchange for trading subject to the terms of the relevant stock exchange. Also a board of directors is appointed by the share holders to deal with the business the company handles. In many countries the board of directors are held liable for many of the company's actions and can be prosecuted.
A Chief Executive or Managing Director is appointed to head the management team which deals with the task of running the company on a day to day basis. Of course, in closely held or owned corporations, the owners are often also on the board of directors and in senior positions of management.
Every corporation must have at least one director and a shareholder. In international business corporations usually there is a requirement of at least one director and shareholder also, but the residency requirements and nationality varies by country of jurisdiction. Every country and state have different laws for incorporation and so the jurisdiction must be chosen based on the specific purpose the company is being formed.
Articles of Incorporation
The articles of incorporation is the document which describes the basic information about the company and its intent of formation. Name of the company, its registered office, list of board of directors, basic rules and regulations are the key points covered in it.
Clarify everything beforehand!
In many countries there still exist complicated and bureaucratic rules for incorporation of new companies, so it is essential for a new investor to know rules of incorporation, rules & regulations of the concerned state or country and perhaps even hire some lawyer or a incorporation agent to handle the incorporation procedures.
International Business Corporation has become trendy with investors due to many financial and non-financial reasons. Some specific rules of incorporation dealing with the offshore corporations are discussed below:
• A simple offshore business incorporation has become easy and is not a lengthy or tiring task any more. Unless you are in a jurisdiction that requires lots of documentation.
• In most cases this cannot be done by the investor himself and he must appoint one of the many offshore incorporation service providers available for this purpose.
• Your wealth will be protected against legal issues.
• Due to rapidly increasing offshore incorporations, many registration offshore company service providers have started incorporation of shelf companies which have been incorporated in the past and are just waiting to be bought. You will get them quickly especially if due diligence has been done on you and this is not your first company with the registration offshore company. But you will pay more than for a new company.
• All the basic work for incorporation is done for these readily available companies for sale and you just have to buy and start your business.
• For various reasons, all countries put some restrictions on foreign investors so it’s better to be aware of your rules of incorporation.
Things mentioned above are just rules of incorporation and in no way cover everything. But this information is a start and should trigger other questions in your mind!
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