Company incorporation is the term which defines formation or creation of a new company which also means the registration process of the company. According to Marshall, Chief Justice of USA,” A person, invisible, artificial intangible and existing in the contemplation of law is termed as a company”. The formation of legal registered association can be defined as company incorporation.
Classification of Company:
Company can be of different types. Companies are mainly classified as the following:
- Companies classified based on the mode of incorporation – This can be further classified as:
- Chartered companies.
- Statutory companies.
- Registered or incorporated companies.
- Companies on the basis of Number of members – This includes:
- Private company and
- Public company.
- Companies on the basis of the control:
- Holding company
- Subsidiary company
- Companies on the ownership of companies:
- Government companies
- Non-government companies
- Companies on the basis of Domicile
- Local companies.
- Foreign companies.
- Multinational Companies.
Company incorporation involves various stages commencing from the initial stage of discovering the idea for the business to the starting of business (final stage). The steps include:
- Promotion - This is the initial stage of company incorporation. This stage includes the business idea and its detailed investigation with the availability of resources and the purpose.
Promotion of a company can be done either through the conversion of existing firm or by starting a new firm. Promotion involves stages that includes discovery of Idea, Preliminary Investigation, Detailed investigation, Assembling ,Financing, Promoters, Duties and liabilities of Promoters.
- Registration – The process of subscription of memorandum of the company is known as the registration. For the purpose of registration a company requires:
- The memorandum of the company.
- The articles and
- The Agreement.
- Capital subscription- Depending upon the issuance of prospectus the procedure for certificate varies.
- Commencement of business- The time when a company begins it business.
Incorporation’s advantage for owner and business:
- Saves owner’s assets from companies liability.
- Easy transfer of ownership.
- Lower tax rate when compared to the personal income.
- Capital raise through sale of stock.
incorporation provides a healthy feel to the shareholders, directors, owners. risks can be taken expecting the maximum return when the company is incorporated. an incorporated company or a business feels financially secured.