Birth of Company – Company Incorporation

Company Formation:

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:

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.