What is incorporation?
Groups of people come together in an organised way for many purposes. Incorporating separates the individual person (member) from the entity. Incorporation makes the group (body) a single entity with certain rights and legal protections as well as some additional obligations.
Incorporated Associations
- have their own corporate identity
- can sue and be sued
- can enter into contracts
- mostly appoint committees to run affairs
- have their documents lodged on a public register.
The Benefits of Incorporation
Here are some of the benefits you can realize if you decide to incorporate your business:
- Personal Liability Protection – An incorporated company affords protection from any personal liability for your business debts and obligations. For example, if someone sues your company they can only go after your company’s assets, not your own (although there are exceptions – see below**under “The Disadvantages of Incorporation”).
- Tax Benefits – If you incorporate you may gain tax benefits, although only under certain circumstances. This is one area to discuss with an accountant, as the marginal tax rates for corporations with taxable incomes in some cases can be higher than those for an individual in the same scale.
- Corporate Identity – Incorporating can give a greater sense of credibility to your business.
- Raising Capital – You can raise capital more easily through the sale of stock and securities if your business is incorporated.
- Unlimited Life – Your corporation can have an indefinite life and outlive you. Do note that LLCs have a limited duration.
The Disadvantages of Incorporation
Some of the disadvantages of incorporation, particularly for the small business owner, include:
- Paperwork – Depending on the structure you choose, you may need to file two tax returns (one for you, one for your business) and keep good records.
- Cost – The fees associated with initial incorporation and ongoing maintenance can put a strain on start-ups. However, LLCs (a hybrid-type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership ) can be a more economic alternative to incorporation.
- **Liability may not be as limited as you think – The limited liability advantages of incorporation can be challenged by personal guarantees and credit agreements. For example, when a corporation has insufficient assets to secure a loan, banks often insist on personal guarantees from the business owner. This can result in personal liability for repayments if your corporation can’t meet its obligations.
Author Box:
Rikvin has been assisting clients from all over the globe in their Singapore immigration and company incorporation matters. We assist local and foreign entrepreneurs who want to register a Singapore company. Our success rate is phenomenal, and all most all of our enterprise clients have entrusted us, with the routine management tasks such as book keeping and secretarial services and we continue to impress them beyond our promise. Rikvin has successfully helped foreign entrepreneurs with Singapore company registration.
Our phones are answered during business hours by specialists and not by an answering machine. We appreciate the value of your time and understand that a person cannot be replaced by technology. This is especially true when it comes to making important business decisions. If you are interested in learning more about Rikvin’s Services kindly email us at info@rikvin.com or give us a call at +65 64838887.Fax : (65) 6438 2436
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