There are some key things to keep in mind when incorporating a company.
The following is a list of some of the most important:
1. Choose the right type of company.
There are different types of companies, and each has its own benefits and drawbacks. Make sure you choose the type that is best suited for your needs.
Here is a list of the main types by Aron Govil:
(a) Company Limited by Shares (Ltd.) –
In most cases, this will be your best choice as it is relatively simple to set up and very easy to use. Your liability for company debts is limited to the amount you have invested in the company, but you cannot claim this money back if the company is wound up.
(b) Company Limited by Guarantee (Ltd. or Ltd.) –
This type of company is similar to a company limited by shares, but the liability of the members is limited to the amount they have guaranteed. This can be useful if you want to set up a charity or other not-for-profit organization.
(c) Private Limited Company (Ltd.) –
A private limited company is similar to a public limited company, but the shares cannot be offered to the public. This type of company is ideal for small businesses.
(d) Public Limited Company (plc) –
This type of company can offer its shares to the public and is, therefore, more suitable for larger businesses. It is more complex to set up and requires more paperwork, but it offers greater protection for shareholders.
2. Choose your business name and register it with Companies House.
Your business name will be one of the most important factors in helping people to find your company online. Make sure you check that it is available before registering it with Companies House.
3. Decide how you want to be taxed.
You can choose to be taxed as a sole trader, partnership, or limited company once your business is established. If you are planning on employing staff, then it may be best to set up as a limited company as this will offer the most protection from personal liability for any debts incurred by your business.
4. Determine if you need an accountant and/or solicitor.
Setting up an accountancy practice or law firm can help you select the type of company that would best suit your needs and advises you about which one is right for you based on the size of your business and other factors. They can also make sure all reams are filed correctly with the necessary authorities.
The reason we advise you to choose the right type of business is that this decision will determine your level of responsibility and liability. Most businesses like to limit their liability as much as possible, especially in today’s economic climate.
The types of businesses include:
1.) INC., which stands for “Incorporated” or sometimes called a “C” company (Corporation).
This type means that the business owners are not responsible for any debts made by the business after they have paid the amount invested in buying shares into the corporation. If a debt develops, then only THEIR MONEY would be at risk and NOT ANY OF THEIR PERSONAL PROPERTY i.e.: House, Car, etc… The drawback to a corporation is that there is a lot of paperwork, more so than other types of businesses, and it can be expensive to set up. The fees for incorporating a company are around $300 in the United States.
2.) LLC, which stands for “Limited Liability Company”.
This type of company offers the same protection as an INC. from any personal debts incurred by the business but is much easier and less expensive to set up. There are no real fees to form an LLC except for the cost of filing your Articles of Organization with your state (usually between $50-$200).
3.) Sole Proprietorship.
This is the simplest type of business to set up and does not require any paperwork or fees, but you are 100% liable for everything and anything that is related to the business. You are personally liable for any debts or lawsuits filed against your business. This type of business is common when you start a one-person operation such as writing, consulting, etc…
4.) Partnership.
This type of company only requires the written consent of the partners involved and no filing fee (although there may be some small fees depending on your state). Just like a sole proprietorship, this usually involves just two people but can involve many more than that. The person who owns the company assets and files the taxes with his/her personal income would be responsible for all debts and court cases filed against the company.
Conclusion:
Each of these options offers different protections from liabilities but also comes with different rules and regulations. This is why we suggest you seek legal and financial advice from someone who specializes in the type of business you want to start before taking any major steps towards your new venture.
According to Aron Govil once you have decided on one of these options, then follow the directions or contact a professional for help on how to register that business type with the necessary agencies.
