Incorporation

Meaning: Incorporation refers to the formation of a new corporation which is recognized as a person in the eyes of law. The company becomes a legal entity after obtaining the certificate of incorporation and it is different it from its owners. 

Steps required for incorporation:

• The first and foremost document to be  filed with the appropriate state office is the article of incorporation, which lists down the purpose of the corporation, its major place of business ,the quantity and type of shares of stock . A registration fee has to be paid, which is usually between $25 and $1,000,varying from state to state.
• A corporate name comprises of three parts namely the "distinctive element", "descriptive element", and a legal ending. All corporations must possess a distinctive element, and in most filing jurisdictions, they must contain a legal ending to their names. However, there are a few corporations who do not prefer to have a descriptive element. Let us take the example of " Computers, Inc.", where the word "Tiger" is the distinctive element; the word "Computers" is the descriptive element; and the "Inc." is the legal ending. The legal ending denotes the fact that it is a legal corporation and not just any business regulation or partnership. Incorporated, limited, and corporation, or their respective abbreviations are the possible legal endings in the U.S.
• It is mandatory to for businesses to observe corporate bylaws which must be filed with the state. They delineate a number of important administrative details which include the scheduling of annual shareholder meetings, voting rights of shareholders and the manner in which shareholders will be notified if there is need for an additional "special" meeting.

Legal benefits:

• Protection of personal assets: One of the major legal benefits from incorporation is the protection of personal assets against the claims of creditors and lawsuits.
• Transferability of ownership: The Ownership of a corporation or a limited company is easily transferable to others, which can be done either in whole or part.
• Retirement funds: Retirement funds and qualified retirements plans can be availed of, without much complexity.
• Taxation: In the United States, the tax rate applicable for corporate is much lesser than individuals. Also they can receive dividends from their company shares without having to pay tax.

Questions:

• What are legal benefits of incorporation?
• What are the steps involved in incorporation?