When a company is established, the owner of the company is the one who is responsible for all the liabilities, losses and law suits against the company and in case of any situation, he is the one who is held responsible on behalf of the company. On the contrary, once a small business is established and grows in a good manner, the owner or the partners of the company wants to separate their liabilities from the company. So, they file an application for converting the company into incorporation which changes the whole process. When it’s incorporation, it will be considered as a separate entity from the owners or partners of the company. This means that in case of any legal situation, the directors or owners of the business won’t hold responsible.
Company Vs. Incorporation:
The main difference between a company and incorporation is that a company is not a separate entity and all the liabilities are referred and linked to the owner(s) of the company where on the other hand, incorporation is considered as a separate entity other than the partners or the owners of the business. This means that even if hundreds of people have shares in the company, they won’t face any situation or legal problem when a law suit is filed against the corporation.
Benefits of Incorporation:
The most important and key benefit of having incorporation instead of a company is that this separates the liabilities of the directors, managers and owners of the company from the corporation. This benefits the owners and partners in the long run as they don’t need to worry to face any legal situation in case of a law suit or a liability situation against the company. Another advantage of registering for incorporation is that when a partner breaches the contract or violates the agreement, he will be held responsible for his actions but it won’t affect the corporation or other partners of the business.
What is mean by Articles of Incorporation?
In order to convert your company into incorporation, you need to file an application in the local government department of your state or country which then, will allow you to convert it. The application that you sent to the government department is also known as the articles of incorporation. In simple words, the articles of incorporation are the documents including the guidelines, rules and regulations for the partners and their rights in the company.
Benefits, importance and uses of Articles of Incorporation:
There are dozens of benefits and advantages of having incorporation instead of a company and in case there are more partners in the business instead of just one owner, it is really important and crucial to file for incorporation and run the company as a separate entity. On one hand, this ensures the security and growth of the company in case of any situation related to the partners where on the other hand, it also helps the partners to stay safe and protected by the law if the corporation is under a law suit from the legal department. This site provides you a superb collection of Articles of Incorporation Templates that are designed in MS Word.
