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| Learn how to incorporate. An incorporating handbook online with step-by-step instructions and forms for every state. | ||
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• Incorporating Forms
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The corporation was conceived to solve the typical problems of the sole proprietorship and partnership forms of business organization. Incorporating allows a group of entrepreneurs to act as one, much the way a partnership does, with one important advantage—since the corporation is a separate legal entity capable of being sued, it can protect its owners by absorbing the liability if something “goes wrong.” (This characteristic of the corporation keeps you from losing your home if someone sues your business.) Also, many people incorporate to avoid personal liability for debts and liabilities of the business. In recent years, the corporation has become a tax-reduction and tax-planning tool. There are all sorts of technical explanations for what a corporation is. Here’s a textbook definition: A corporation is an artificial being created by operation of law, with an existence separate from the individuals (shareholders) who are its owners. It is a separate and distinct entity that acts for, or on behalf of a person or group of people. Corporations are created primarily to operate a business for the benefit of its owners—the shareholders. When you incorporate a business, you actually create an “artificial person” and let this “person” operate your business for you, subject to your control of course. A corporation is essentially a legal “person” created and operated with the permission of the state where it’s incorporated. It’s a person like you and me, but only “on paper.” As a legally recognized person, a corporation enjoys most of the rights and privileges that you and I do. Among other things, a corporation can own property, sue, be sued, and of course, operate a business. Corporations also enjoy many of the privileges enumerated in the Constitution and the Bill of Rights like freedom of speech. The only difference between a real person and a corporation is this—a person has a physical body and a corporation does not. A corporation is “brought to life” when a person, the incorporator, files a form with their state known as the articles of incorporation. You can think of the articles of incorporation as the corporation’s birth certificate. (This document goes by a different name in some states, certificate of incorporation, certificate of organization, and charter are some of the most common.)
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