One of the first things every entrepreneur should consider doing is formally registering their company. It’s not always mandatory, but it benefits the business owner. This article will show you the steps to register a business.
1. Choose A Legal Structure
There are various structures for incorporating a company; you can choose the one that suits you best. The structures include
A sole proprietorship is a one-man show. There is no distinction between the company and its owner. The owner is personally responsible for any corporate debts, judgments, and taxes.
This is when two or more people agree to form a corporation and share responsibility for managing it. The partners bear full responsibility for their business, just like a sole proprietorship. They are personally liable for taxes and corporate debts.
This structure is the same as a general partnership except that the owners don’t bear full liability for corporate debts and judgments. They are only liable to the extent of the money they invested in the company.
Limited Liability Partnership
In this case, the business assumes a separate legal identity from its owners. Hence, the owners aren’t personally liable for the debts or incurred losses. A limited liability partnership can have dozens of shareholders. It’s the best option to pick if you plan to raise money from external investors.
2. Register A Corporate Name
The next step to register a company is choosing a name. You need to reserve a name that another company hasn’t already taken; you can check corporate registries to confirm this. The name shouldn’t be similar to an existing brand or trademark, or you risk lawsuits.
3. Choose Shareholders And Directors
Every registered firm must have at least one shareholder. You’ll need to choose a share capital, the total number of shares for your firm, and allocate specific amounts to different shareholders. The higher the number of shares a person owns, the greater their influence over corporate affairs and decisions.
You also need to appoint directors responsible for setting strategy and day-to-day management. A shareholder can also serve as a director, but not all directors are shareholders.
Some countries require every business to appoint a secretary who handles administrative tasks and advises directors on complying with regulations.
You need to present many documents to incorporate a firm. The documents you’ll likely be asked for include
- Valid identification for all shareholders, directors, and the corporate secretary.
- Proof of a registered office address where you can receive mail concerning business-related matters.
- Proof of share capital and share allocation.
- Memorandum of Association: A legal document signed by all shareholders acknowledging their intention to form a corporation.
- Articles of Association: A legal document outlining the rules governing the company.
5. File and Submit Application
With the above requirements ready, it’s time to apply to the government agency that handles corporate affairs. For instance, in the U.K., you submit your incorporation application to Companies House. You can submit your application online or in person. Online applications tend to get processed faster than in-person applications.
If your application is reviewed and approved, you’ll be given a Certificate of Incorporation acknowledging that your firm has been registered and is formally recognized by the government.