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Incorporating a Small Business

Ujwal Deshmukh
Wish to incorporate your small business with a large multinational or some other equivalent organization? Wish to move out of the 'proprietary firm' image and reap the benefits of incorporation? Read ahead...
Unlike in the proprietary firm where you are solely responsible for profits, loss and the entire administration of your organization, corporation is an entity independent from the entities of its owners.
Corporations are governed by corporate laws, rules and regulations and these are in the interest of their owners, shareholders, management, vendors and creditors, and all the other manpower that is involved in running the corporation.
Nowadays, corporations have become common and the most preferred place of employment among job seekers. The reasons behind this are job security, good remuneration and enormous growth opportunities for the corporation as well as the employees.
Moreover, incorporating a small business has become one of the business growth strategies in this world of growing business competition. Also in recent times, many private or proprietary firms have started incorporating into large multinationals. After having understood the short idea of corporation let's move on to know how to incorporate a small business...


The rules, regulations and procedures for incorporating any business remains the same. Be it a small proprietary firm or a large company. You as the authority in charge of the business and your firm have to complete some standard formalities. However, I will explain these formalities in the form of a procedure. This will give you a clear idea.

Decide the Incorporation

The first thing you need to give a thought to, is to decide where you want to incorporate your small business. Whether you want to incorporate it with a multinational company operating in many countries, or with an organization operating within the state.
Consider your current business volume and the estimated growth of your business. Evaluate these things properly and then decide the span of your incorporation.

Indulge in an Agreement

The next thing you need to do is, sign an agreement before getting incorporated with the company. This is generally referred to as the pre-incorporation agreement. This is done in order to decide the board of directors and shareholding policies of the new incorporation.

Filing the Application

When you are done with the pre-incorporation agreement, you need to file your application to register the name of your incorporation. The authority for the issuance of forms will be the Secretary of State's office. Submit the form and the Secretary of State's office will inform you whether the name you have applied for, has already been taken.

Legal Formalities

Once the name is decided, following the Secretary of State's office's instructions, start preparing the articles for your business incorporation. You will be receiving an official certificate, which will include all the essential details of your incorporation.
Read all the clauses and the entire incorporation agreement carefully and then sign the agreement. Take the signatures of all the authorities directly concerned with the agreement.

Meeting the Stockholders

Conduct a meeting inviting all the stockholders of the organization and discuss the corporate charter sent by the state. This charter will contain information such as the articles of incorporation, location of the business and also details such as reasons for incorporation.

Electing the Board of Directors

It is necessary to appoint a new board of directors for the newly formed corporation. Election is the method by which you need to form the committee of directors. Inform the shareholders about this and conduct a voting session.


  • As a corporation now, you are liable only for the amount of money you have invested in the corporation, unlike in proprietorship wherein you were the only person responsible for everything.
  • The existence of the corporation will never end. It would not get closed or dissolved even on the death or resignation of its shareholders, owners or any of the directors.
  • Corporations help build business fast and are more reliable and stable than any other form of organization, due to their corporate identity.
  • In corporations, raising or producing funds for any project or business-related activities is not difficult, as here the corporation can sell funds and increase the equity capital.


  • As a corporation, you need to handle and maintain a lot of documents. These books include corporate law books, the share register, the director's register and many other documents and records pertaining to the corporation's business.
  • Moreover, the cost incurred in registering, setting up and maintaining a corporation is costly.
  • There is another tax return added to your tax. You will have two taxes, which includes tax on your personal revenue and the tax on your corporation income.
  • Limited liability is one of the advantages of this procedure. However, this may not be the case always. If the financial institution does not find your corporation eligible enough to repay its credits, it will often ask you to keep your personal assets as a guarantee to repay the money.
You have thus seen the procedure, advantages and disadvantages of incorporating a small business. Now, it is up to you to apply your business intelligence to reach to a conclusion, and take a sensible decision of whether to incorporate your business or not.
Check whether incorporating is feasible in case of your business, see whether you have enough resources and funds to manage the incorporation.
If you find this is possible and well within your scope, then go ahead! Remember that at the end of the day, what matters is your business growth and development with all your personal assets safeguarded.