á
 



 

V The process by which a business becomes a legal entity

separate from its owner(s).
V A corporation has a separate and distinct legal and tax
identity from its owners.
V You know that a business is a corporation if it includes
the word "Incorporated" -- or the short form, "Inc." --
in its official name.
V In legal terms, a corporation is considered an
individual -- it can own property, earn income, pay
taxes, incur liabilities, and be sued.
V A legal process through which a company receives a
charter and the state in which it is based allows it to
operate as a corporation.
V The process of incorporation involves writing articles of
incorporation and registering them with the appropriate
government entity in order to receive a corporate
charter, which confers corporate legal status
V The Companies Act of 1956 sets down rules for the
incorporation of company.
V The forming of a new corporation (a corporation being
a legal entity that is effectively recognized as a person
under the law).
J The first step in the formation of a company is the
approval of the name by the Registrar of Companies (ROC)
in the State/Union Territory in which the company will
maintain its Registered Office. This approval is provided
subject to certain conditions. Further, the last words in the
name are required to be "Private Ltd." in the case of a
private company and "Limited" in the case of a Public
Company. The application should mention at least four
suitable names of the proposed company, in order of
preference. In the case of a private limited company, the
name of the company should end with the words "Private
Limited" as the last words. In case of a public limited
company, the name of the company should end with the
word "Limited" as the last word.
V The Memorandum of Association and Articles of
Association are the most important documents to be
submitted to the ROC for the purpose of incorporation of a
company. The Memorandum of Association is a document
that sets out the constitution of the company. It contains,
amongst others, the objectives and the scope of activity of
the company besides also defining the relationship of the
company with the outside world.
V The Articles of Association contain the rules and
regulations of the company for the management of its
internal affairs. While the Memorandum specifies the
objectives and purposes for which the Company has been
formed, the Articles lay down the rules and regulations for
achieving those objectives and purposes.
V After the duly stamped Memorandum of Association and
Articles of Association, documents and forms are filed and
the filing fees are paid, the ROC scrutinizes the documents
and, if necessary, instructs the authorised person to make
necessary corrections. Thereafter, a Certificate of
Incorporation is issued by the ROC, from which date the
company comes in to existence. It takes one to two weeks
from the date of filing Memorandum of Association and
Articles of Association to receive a Certificate of
Incorporation. Although a private company can commence
business immediately after receiving the certificate of
incorporation, a public company cannot do so until it
obtains a Certificate of Commencement of Business from
the ROC.
V 1. Obtain Director Identification Number (DIN) and
Digital SignatureCertificates (DSC) for each Director /
Promoter before making any application to ROC.
V 2. Apply for the name availability of the proposed
company to ROC. For this one has to fill Form 1A and
submit online along with requisite fee with ROC.
V 3. Once Name is approved and made available by the
ROC it remains valid for 6 months. If you do not
incorporate the proposed company within 6 months
you can renew the name by paying prescribed fee.
V 1. Memorandum of Association
V 2. Articles of Association
V 3. Letter of authority to a person for carrying out
corrections
V 4. Declaration by the Promoter Directors
V 5. Form 32 for the Directors
V 6. Form 18 for registered office address
V 7. Demand Draft in favour of Registrar of companies
for the prescribed amount towards registration fee.
V 5. Memorandum and Articles of Association are to be
duly stamped before
V filing with ROC
V 6. All the above documents are also filed in original
with ROC,
V 7. On the receipt of the documents ROC will scrutinize
the papers and if any modification is required he will
direct to make such changes accordingly.
V 8. Once ROC is satisfied and scrutiny is completed he
will issue certificate of Incorporation. The company
would come into existence from the date of certificate
of incorporation.
V 0
  One of the key reasons for forming a
corporation is the limited liability protection provided to
its owners. Because a corporation is considered a separate
legal entity, the shareholders have limited liability for the
corporation's debts. The personal assets of shareholders are
not at risk for satisfying corporate debts or liabilities.
V ©
  Since a corporation is a
separate legal entity, it pays taxes separate and apart from
its owners (at least in the typical C corporation). Owners of
a corporation only pay taxes on corporate profits paid to
them in the form of salaries, bonuses, and dividends. The
corporation pays taxes, at the corporate rate, on any profits.
V 
 
  The built-in stock structure of a
corporation makes it attractive to investors.
V ©
 . The stock structure also allows
corporations to attract key and talented employees by
offering them an ownership interest in the form of stock
options or stock.
V x 
 A business owner who works in his or
her own business may become an employee and thus be
eligible for reimbursement or deduction of many types of
expenses, including health and life insurance.
V ë   Shares of corporations are
freely transferable, because as a separate entity, the
existence of a corporation is not dependent upon who the
owners or investors are at any one time. A corporation
continues to exist as a separate entity, and is not
terminated or dissolved even when shareholders die or sell
their shares. Shares of corporations are freely transferable
unless shareholders have "buy-sell" agreements limiting
when and to whom shares may be sold or transferred. Also,
securities laws may restrict the transferability of shares.
V x 
 Corporations have a set
management structure. The owners of a corporation are
shareholders, who elect a Board of Directors, which then
elects the officers. Other than the election of directors,
shareholders do not participate in the operations of the
corporation. The Board of Directors is responsible for
managing and exercising the rights and responsibilities of
the corporation. The Board sets corporate policy and the
strategy for the corporation, and elects officers Ȅ usually a
CEO, vice president, treasurer, and secretary Ȅ to follow
the policies set by the Board, and manage the corporation
on a day-to-day basis. In a small corporation, the lines
between the shareholders, Board of Directors, and officers
tends to blur because the same people may be serving in all
capacities.
V 
 A corporation continues to exist
until the shareholders decide to dissolve it or merge with
another business.