Benefits of Incorporation
Incorporation may be called as the forming up of a separate corporation which has a separate legal identity and is recognized as person under the eyes of the law. The corporation may be of any kind i.e. a government organization, a private organization or a non-profit organization. It can also be defines as the process by which a company gets the permission of the law to function as a corporation. After getting the incorporation certificate the company has to add the word incorporated into its name and then the company becomes an incorporated company.
The benefits of incorporation:
The advantages of incorporation are experienced by each and every company that gets the incorporation certificate. Thus, the advantages of incorporation differ from company to company. Some of the advantages of incorporation common to all the types of companies are:
Limited liability: This is one of the most important advantages of forming a corporation. Limited liability means that the shareholders are liable to the face value of the shares hold by them and their personal property is not attached in case of any loss to the corporation. Thus, this advantage provides a security to the shareholders and promotes then to invest more in the company.
Freely transferable shares: After the incorporation the shares of the company become freely transferable i.e. the shares of the company can be listed in the stock exchange and the existing shareholder are free to sell off their shares as and when they like to do so. There is no need for the permission of the other shareholders for selling off the shares.
Personal involvement: If the owner of the company is also working in the company then he is also entitled for a reimbursement an all other facilities enjoyed by the other entire employees like the medical facilities, transformational facilities etc.
Large capital: After the incorporation the company can enjoy the benefits of a very large capital. The capital can be raised from the various financial institutions or through listing the shares in the capital market. The type of share may include preference shares or normal shares.
Tax benefits: After getting the incorporation the company is treated as a separate legal entity and all the taxes are paid apart from the owners. The owners are entitled to pay only tax on the corporate profits that they receive in the form of salaries, dividends or bonus.
Operational structure: The structure of a corporation is generally a set one. The owners become the shareholders who select the directors of the company and simultaneously the other officers are elected by the directors. The owners of the company co not participate in the company except in the selection of the directors of the company.
Perpetual existence: After getting incorporated the company becomes like a person in the eyes of the laws and has the ability to sue and can be sued by the other parties. After getting incorporated the company even lasts even if all the members leave the company. It continues to live in the books of the law.
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