Incorporation – What, Why, Where and How

29 Oct ’09

Over the next while I’ll be posting on some of the more common questions I get from clients.  Please feel free to leave a comment if you have something to add.  Today, it’s the basics of incorporation.

What is incorporation and why do I need to incorporate my business?

Incorporation is the process that legally creates a corporation – a form of organization that is probably the most common form for technology businesses.  There are many reasons for this, but the three most important are probably the tax advantages one gets from incorporation; the corporation’s independent, perpetual existence; and the corporation’s limited liability.  The latter two mean that a corporation is a separate legal person, distinct from its owners, and that in general the owners do not have anything at risk other than their investment in the corporation.  For obvious reasons, these characteristics facilitate operating, financing and selling businesses.

Not every business needs to incorporate – sole proprietorship and partnership, for example, are popular vehicles in many contexts.  But the typical life-cycle of a technology business involves activities and relationships with third parties that make incorporation the best choice in most cases.

(Finish reading this post on Hyndman | Law).

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