How to incorporate your business in Delhi
With the development of business people need to upgrade its structure accordingly. In sole proprietorship or partnership ventures owners are responsible for all the liabilities. If you need more capital for the development of your business then you have to arrange on your own in both these types of ventures. On the other hand in case of corporation you can arrange it easily by lending from banks, investors or selling shares of the company. People change formation of their companies from partnership and proprietorship to corporations to enjoy benefits of tax and liabilities.
Debt is the only way to raise capital in partnership and proprietorship companies. This debt is obtained from banks or investors at high interest rate because there is unlimited liability. On the other hand corporations can raise funds by selling their shares or they can borrow money from banks or other institutions at lower interest rates. Incorporating a business provides public security and owners are bound to obey the laws of the country for the development of the business. Incorporated business is a separate legal entity which has long life.
We know that risk and benefit in business are interlinked; higher the risk greater the benefit. Incorporating a business reduces risks, decreases liability and increases chances of success. People incorporate business to obtain benefits such as limited liability, access to capital, tax advantages and easy process of ownership transfer. Shareholders invest limited amounts to form a corporation but obtain benefits such as salaries or dividends depending on the nature of their position in the venture. In case of loss shareholders are not liable to the whole loss due to which their personal assets remain secure.
Corporations fall under two main categories such as ‘C’ corporation and LLC. Most of the companies undergo “C” Corporation because they can raise capital by selling shares with limited liability. You need to file “Articles of Incorporation” according to the law of the state. Necessary decisions are taken by the participation of partners and directors. Limited Liability Company is a combination of “C” Corporation and partnership venture. It is difficult to form LLC Company but it can be managed easily. In LLC business is taxed through the income tax of the owner.
You can register your company from the state where rate of income tax is low as compare to your home state. It is not a big deal to complete the incorporating process successfully because choosing a good business form is more important decision for the owner. The process of incorporation can be complex for some business owners therefore they can hire services of attorneys. Before incorporation you need to evaluate and analyze right kind of corporation.
Methods of Business Incorporation
You can incorporate your business yourself, through an attorney or with the help of an online incorporation service provider. The process of incorporating your business is an easy task and consists of three steps; selecting a corporate name, preparing your documentation and payment of necessary fee.
You can complete these steps to incorporate your business by yourself. In the process of incorporation you need to check the availability of your corporate name in your selected state where you want to register your business. You should select a fair name without any deception or close resemblance with already existed names in the state. Name check is the first and most important step in the process of business incorporation. In second step you need to prepare necessary documents and Articles of Incorporation according to the law of your selected state. In the final step you need to pay charges such as state filling fees, taxes or any other charges. Laws to incorporate a business and filing fee can vary from state to state. In this process you are responsible for the whole communication with agencies.
You can also hire services of an attorney to incorporate your business. The cost of this method is high but it requires less effort on your part. You tell your requirements to your attorney whether you are going to form a LLC or S corporation. An attorney or lawyer knows necessary information, policies due to which he or she can handle related issues skillfully.
The most common method of incorporating your business is hiring an online incorporation service provider company. The cost of this method is least due to which it is preferred by most of the business owners. This is an easy process because you need to follow steps according to the instructions of your computer. You can complete the whole process in minutes by submitting necessary information and rest of the work is done by the service provider. Different states take different time to complete the process.
Online incorporation service providers charge less for the whole process as compare to an attorney or a lawyer. The whole process of business incorporation takes $100-$400 and 4-6 weeks. Online incorporation service providers provide complete administration services but no legal advises so you should know all legal issues before the process. Online companies check availability of name, register business name and prepare necessary documentation according to the laws of the state. After the establishment of your corporation a meeting of directors or shareholders is held to take necessary decisions.
Advantages of Business Incorporation
- The main advantage of incorporation is limited liability for the owners (shareholders) of the business. Creditors will not nock the doors of shareholders of the corporation. On the other hand in case of partnership or proprietorship personal property or assets can be used to pay debts.
- Life of corporation is long because it does not depend on its members. If an owner or partner dies or wants to sell his or her shares then organization exists and will continue.
- You can set retirement funds and plans easily in the setup of an organization.
- Ownership of the organization can be transferred easily by selling one’s shares.
- You can raise funds and capital by selling your stock and shares.
- There is centralized management in a corporation.
Disadvantages of Business Incorporation
- Double taxation is one of the basic disadvantages of the corporation. Profits given to shareholders are called dividends and taxed twice; firstly they are taxed as income to the corporation and then income to the shareholders.
- The setup of the corporation is very complex and a considerable amount of expenses are applied on corporation formation.
- Record keeping of corporation is necessary
Whatever type of company is; LLC or S each provides limited liability to its shareholders without the disadvantage of double taxation. Companies have advantages and disadvantages therefore one should have good knowledge of company formation before deciding the form of his or her business.
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