The main reasons why a lot of people consider setting up a business is not just the idea of generating income. For many, building an enterprise is just the start towards something bigger. Indeed, when a business keeps growing, it’s best to keep the momentum going by transitioning into a corporation.
In a way, a corporation is considered the peak of the business. It’s when your whole operation becomes larger and you gain access to more resources. However, when the structure of your business becomes more stable, you face more serious risks that will hit you hard if you’re not ready for them.
If you’re thinking of turning your business into a corporation, you will have to reduce these risks by knowing how to properly incorporate. Here are a few things you need to know as you prepare to scale your business:
1. Learn about your country’s incorporation requirements
Of course, before everything else in the process of incorporation, you should be able to get a good grasp of the things you need to do to start. Every country sets its own requirements and mechanics for incorporating. In the United States, for instance, you usually have the choice between a corporation status or a limited liabilities company (LLC) status for your business.
At any rate, you will have to learn a great deal about federal laws that set the standards and limitations, especially when it comes to listing your company on the stock market. Sounds convoluted? Well, this is just the beginning to the arduous journey of building your corporation.
2. Understand corporate governance
As you learn more about the laws and the requirements you need to incorporate your business, you will at some point come across the term “corporate governance”. This basically forms the nucleus of your business; the reason for its being, if you will. Corporate governance sets the legal structure of your business. It includes the bylaws, structure, and rules needed to run the business efficiently and within legal bounds.
In a way, corporate governance establishes the direction your business will take on account of the relationships it shares with a diverse range of entities such as stockholders, investors, and executives, among others. You can expect this part of the incorporation process to be the most taxing, unless you talk to the right business attorneys that specialize in corporate governance.
3. Form your Board of Directors
While the Articles of Incorporation form the operating and management principles behind the business, it’s the Board of Directors that acts upon these principles. Being the sole policy-making authority of a corporation, the Board should be occupied by the best people exhibiting leadership potential.
However, you may or may not be allowed to appoint just about anybody to the Board. You may need to review your Articles of Incorporation regarding appointments. Indeed, you as the owner and CEO of the business do not have a final say on who gets to have a seat. Your shareholders will determine it for you through a vote.
A corporation is a large business entity and it can get really complex for business owners who are just getting acquainted with the various laws of business. Still, with the right help, you can get around legal issues for a seamless transition.