There is a lot of misinformation and myths surrounding the idea of incorporating a business. In this regard, it is not uncommon to see even seasoned business owners wondering whether they should incorporate their business.

There are a couple of factors to consider before incorporating your business such as the type of corporation, the nature of your business, location of your business and where else you intend to do business outside your business location. Most of these factors are considered due to the variance of state laws governing corporations. However, in general, there are advantages and disadvantages that come with incorporating a business.

What is incorporation

Incorporation is basically registering a corporation by preparing, signing and filing the articles of incorporation as required by law. A corporation can be owned by one person or a number of people. Nevertheless, it has to fulfill certain requirements depending on the state you are registering the corporation.

A corporation is a body recognized by state and federal laws. Basically, the low treats it as a legal person meaning it can commit crimes, pay taxes, file lawsuits, sell/buy property and even sign contracts. One of the most significant advantages of forming a corporation is that it protects the owner/S from personal liability in case of corporate obligations and debts. Nevertheless, these are limits to this.

How do you incorporate a business?

Incorporating a business is as simple as registering one. To get started, you will need to get the following ready.

  1. A suitable name that no other corporation uses.
  2. Personal details of all incorporators.
  3. Writes down the purpose of the incorporation.
  4. Write down the privileges and rights of each shareholder.
  5. List the board of directors.
  6. Writes down the address of the company.
  7. Come up with bylaws which basically show how the company will run in detail.
  8. You will pay between $100 and thousand dollars for registration.
  9. Issue stock certificates to shareholders and purchase the necessary licenses such as business permits.

Basically, all this information will be found in the document called the articles of incorporation which should be accessed at any state office. You can fill in the details by yourself or use the help of an attorney. The letter sounds better because your attorney can guide you through legal jargon that you might not be able to understand by yourself.


Once you heard the articles of incorporation approved by the Secretary of State, that’s it you’re done they’ll send you a certificate of incorporation.

Advantages of incorporating a business

There are numerous advantages that come with incorporating a business one of them being the fact that you and your corporation are treated as to individuals when it comes to legal issues. Other advantages include:

  1. Limited liability.
  2. Reduced tax rates.
  3. Access to funding.
  4. Smooth continuity in case ownership changes.
  5. Separate your personal legal issues with your businesses’.

Disadvantages of incorporating a business

Starting a corporation might be a really good idea because of the numerous advantages. Nevertheless, it has its own draw backs which include:

  1. A complex structure as compared to a sole proprietorship or partnership.
  2. Higher initial costs as compared to registering a business.
  3. Increased administrative tasks which include articles of amendment, notices in case of change of address, board of directors are registered offices. Furthermore, you are required to file in annual returns and the articles of incorporation although you can use company secretarial services to handle those.

Should you incorporate your business?

Whether your business needs to be incorporated or registered is a personal decision influenced by a couple of circumstances. However, in general, the advantages of incorporating your business outweigh the disadvantages and therefore a good idea in the end. Nevertheless, working with your attorney would be a wise idea in order for you to fully understand what it means to incorporate a business. Furthermore, an experienced attorney should be able to examine your business and offer an informed recommendation.

Before registering a business, just remember that the best way to separate your personal legal and financial issues is by incorporating a business. It does not only protect you from lawsuits in case of bankruptcy or debt, but also reduces your taxes.Is incorporation right for your business? The ins and outs of forming a corporation