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What Is the Incorporation Process?

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  • Written By: Jess Rhodes
  • Edited By: Melissa Wiley
  • Last Modified Date: 26 July 2014
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The incorporation process forms a business, non-profit, or club into a new legal entity that is recognized independently of its owners. The concept of incorporation is internationally recognized, although the incorporation process varies regionally. Despite variations, the process for incorporation usually involves establishing a name, writing the organization's bylaws or articles, and filing the application with the accompanying fee to the appropriate authorities.

Internationally, the benefits of incorporation are similar. By forming a new organization, the original owners generally receive protection of their personal assets. By becoming its own person under the law, a corporation can exist beyond its original owners, giving it durability. Income potential also changes, as many forms of incorporation allow for the sale of stock and have alternate taxation methods.

Documents needed for the incorporation process vary by region, but most require verification of an approved corporation name, the Articles of Incorporation, and the appropriate filing fees. Countries have various means for approving corporation names. In the U.S., for example, corporation names generally have three distinct parts, a distinctive element, a descriptive element, and a legal ending. In most situations worldwide, the naming process includes verification that the name of the new company does not already belong to an existing company.

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The Articles of Incorporation, or some form of corporation charter, is generally required for the incorporation process worldwide. This document outlines bylaws, the purpose of the corporation, and information about shareholder voting and meetings. This document is often considered a legal document, and the corporation can be legally held to its contents, so the advice of an incorporation lawyer is often sought out at this stage.

The incorporation process in the U.K., for example, can be completed in a matter of hours, while processes in other countries can be very complex and time consuming. Filing requirements to incorporate include the Articles of Association, the Memorandum of Association, and the Form IN01, providing the location of the registered office and ensuring compliance with the law. In the U.K., incorporating electronically is possible, speeding this process up significantly.

Incorporating a business in India requires many steps and is submitted in hard copy, making it an arguably much longer process than in the U.K. The corporation name must first be approved by the Registrar of Companies in the state where the business’ headquarters will operate. Articles of Association and a Memorandum of Association must then be created and stamped. These documents are then be submitted with a power of attorney, additional verification, and supplemental documents.

Since tax rules are often different upon incorporation, new corporations need to be registered with governmental tax authorities. Accountants or tax specialists can help new corporations restructure their accounting system to meet the new requirements. In addition to calculating taxes, this setup can allow for an expansion of income due to stock sales.

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