In some cases, shareholders of small companies may get taxed twice. One possible example would be a labor union that operated an online uniform store, so that the union members could purchase work clothing at or near wholesale. Business registration does not offer the same protection of personal assets. Each state will have slightly different requirements for forming a partnership, but in many, if not most cases, it is a matter of filling out a form and paying a small fee. Separate credit rating regardless of an owners personal score. A number of agreements will also have to be signed. When attorneys sue corporations and demonstrate that the corporate records were not maintained and that the corporation was not, in fact, acting like a separate legal entity, they have “pierced the corporate veil”, and the protection for personal property is lost. 2. In the United States, corporations must pay a fee between $25 and $1,000 depending on which state, and choose an operating name. They must also decide on an operating name. Corporations located in the United States must pay a fee depending on which state they're in, which can range from $25 to $1,000. Once you're registered, corporations will need to pay local, state, and federal taxes that are filed separately from its shareholders. The reason you register a business is more for the business license, which is needed to operate in some areas. You’ll start receiving free tips and resources soon. Share it with your network! 3. Search and apply for your state license here. Depending on the state, LLCs may also have a limited lifetime. Date of Incorporation vs Date of Registration. The Benefits & Costs of Incorporating Your Business. Company formation is where a series of decisions are made and documents and processes are adopted to reflect what was decided on. The risk here is that because there is no difference between the individual and the company, the individual is personally liable for everything the company does. The Registrar of Companies will then verify the documents submitted for registration. Let me know in the comments if you have anything specific you want me to address. Unfortunately, there isn't an easy answer or formula that every new business can follow when selecting a business structure as part of the business planning process. Search and apply for your state license here. The sole proprietorship can evolve into another business type later, but is the fastest and easiest way to start. Many new online business owners aren't sure if they should incorporate, what their business structure options are, what incorporation might mean for the business, or even what they need to do to form a company. These include a sole proprietorship, a limited liability company (LLC), a partnership, a cooperative, a corporation, or an S corporation. The date given by the Registrar in the certificate will be the date of incorpor… Cooperatives are businesses created to service and benefit the owners. Simply put, a sole proprietorship is an unincorporated business where there is no legal distinction between the company and the individual who owns it and runs it. The costs to register are different but tend to be affordable since they expire each year and need to be renewed again. A limited partnership can limit both control and liability for specified partners. However, be careful of the risks associated with certain business credit cards. The corporation is a legal entity separate from any “natural” person, meaning that its owners are generally free from personal liability - which can save your butt if things go awry. The definition of “doing business in a state,” like so many things, is different from one state to another, but there are common themes to … Almost there: please enter your email below to gain instant access. The Companies Act, 1956 prescribes specific procedures for incorporation and registration of companies. This differs state by state, so it is a good idea to compare individual tax rates, which would apply for sole proprietorships, partnerships, or LLCs, with corporate tax rates. Put another way, its customers are its owners. What Is the Purpose of the Incorporation Process? Right now, over 70% of US businesses are owned by sole proprietors and operate successfully without incorporating. The certificate will have the registration number, name of the company and the date of incorporation. The main difference is that incorporation creates a separate legal entity. They include: Getting your business registered may come with certain perks. The difference between incorporation and registration should be understood when forming a business. INCORPORATION OF A COMPANY Any three or more persons associated for lawful purpose may, by subscribing their names to the Memorandum of Association and complying with the requirements of the Companies Act, 2017 form a public company and any two or more persons so associated may, in like manner, form a private company. Some of these include special credit cards or wholesale discounts. LLCs require a lot less record keeping than corporations do, provide some protection for the member’s personal property, and are burdened with fewer profit sharing requirements than corporations. This business type is especially good for new ecommerce companies that have a low risk of liability. Also, once the business grows to more than one person, it can no longer be a sole proprietorship. Here's a rundown on all of your options: This is by far the most common and popular form of business in the United States - mostly because it's easy to start and manage. If there are any discrepancies found, concerned person was called to visit the Registrar’s office to rectify the errors in the documents. Partners share responsibility and profits. Business registration does not offer the same protection of personal assets. The primary benefit of forming a corporation is that regarding the corporation’s assets or debts, a shareholder’s personal property is protected. A registered company can exercise all functions of a company incorporated under the Act. Being registered may also make it easier to get bank credit, but like with business credit cards, you should use caution.