Incorporation: Definition, How It Works, and Advantages

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It’s advisable to incorporate your business before launching. Incorporation offers many advantages, including higher customer trust, legal backing, and the ability to raise money from external investors. This article will explain how it works and the benefits you can expect from incorporating your firm.

What Is Incorporation?

It is the legal process of forming a business and getting it recognized by the government. The business assumes its own legal identity after incorporation and becomes separate from its owners and directors. 

Virtually all countries allow people to register their businesses formally. The result of this registration is called a corporation.

Understanding Incorporation

Incorporation describes the process required to get your company formally recognized by government authorities. Incorporating a company before starting is not compulsory, especially if it’s a sole proprietorship with little complexity. However, it’s advisable to register the business because of the benefits it brings.

How To Incorporate A Company

The process to incorporate a company in Singapore isn’t complicated. The country is famous for being one of the easiest places to form a business. The Accounting and Corporate Regulatory Authority (ACRA) is the local government agency overseeing incorporation.

  • Choose A Name

You’ll need a unique name to differentiate your company from others. It must be a name that hasn’t been reserved by another corporation or isn’t similar to an established trademark. You can check the availability of your proposed name on ACRA’s website.

  • Choose Directors

Every corporation must have at least one appointed director to manage its affairs. According to Singaporean rules, any director must be 

  • At least 18 years of age and of full legal capacity
  • A local resident or a citizen 

If you’re a foreigner looking to register in Singapore, you must find a local director to appoint.

  • Choose Shareholders 

Every corporation must have at least one shareholder. A shareholder can be a foreigner or a local resident. You’ll choose your total number of shares and allocate a percentage to each shareholder. Shares give every holder a right to vote and receive dividends if your firm issues them.

  • Choose A Secretary

Every Singaporean business must appoint a secretary within 6 months of registration. The secretary must be a local resident and a natural person. Their job is to manage the company’s administrative affairs and advise directors on complying with the law.

  • Get An Office Address

Your corporation must have a valid office address where anyone can send mail concerning business matters. This address must be accessible during working hours.

  1. Documentation and Submission

You’ll need to submit documents to ACRA, including

  • Valid identification for all shareholders, directors, and the appointed secretary
  • An Articles of Association stating the rules your business will adhere to
  • A Memorandum of Association signed by all shareholders acknowledging their intent to form a company
  • Proof of residence for shareholders and directors

Once you have the required documents, submit them and wait for feedback from ACRA. If the agency approves your registration, you’ll receive a Certificate of Incorporation acknowledging this approval.

Benefits Of Incorporation

  • Limited Liability: The company assumes a separate legal identity so that the owners won’t be personally liable for corporate debts. 
  • Tax Deduction: You can deduct some business expenses from your tax liability.
  • Fundraising: You can sell shares to other investors to raise funds or receive a loan from a financial institution.
  • Customer trust: People are more willing to transact with registered businesses because they’re sure of legal backing in case of disputes.

Transferability of Ownership: You can easily transfer ownership of the business to a third party, e.g., a family member or another corporation acquiring yours.

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