A Corporation is a legal business entity that is distinct from its owners (known as shareholders). Once formed, it can enter into contracts, own assets and incur debt, sue and be sued–all on its own. Corporations offer a number of operational, tax and legal advantages over non-incorporated businesses such as partnerships and sole proprietorships. These include:
Unlike a partnership or sole proprietorship, where the owner is personally liable for company debts and obligations, corporations are legally separated from its owners, creating a protective bubble of limited liability. This is referred to as the corporate veil and protects individual owners and investors from personal financial liability beyond their original investments in the corporation.
Corporations can raise additional capital through the sale of shares to outside investors. Incorporating also gives credibility to a business and may attract potential customers, especially when the corporation is listed on a stock exchange and becomes publicly traded.
While there are no educational requirements or licensures to incorporate, it is generally recommended that you seek counsel, be it from a lawyer, accountant or someone with significant business experience, to ensure that your corporation is setup properly and that all the relevant administrative hurdles are completed correctly. Once you are incorporated, you must draft corporate bylaws which stipulate how your corporation will operate and govern itself. Once drafted, these must be approved at an organization meeting, and the initial board of directors should appoint officers and directors.
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