incorporate

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Incorporation

The process by which a business becomes a legal entity separate from its owner(s). Incorporation presents a number of advantages: becoming a separate legal entity means that the business itself makes or loses money, which protects owners from liability for its debts. Likewise, a corporation is taxed on its earnings separately from its owners, and, in many countries, the corporate tax rates are lower than personal tax rates. 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.

incorporate

To obtain a state charter establishing a corporation. Owners of proprietorships and partnerships incorporate in order to obtain limited liability for themselves and for potential investors. The limited liability makes it easier for the firm to raise additional equity capital.

incorporate

To form a corporation by filing documents in the appropriate state authority, which may be one's own state or a corporation-friendly state such as Delaware. Once having formed the corporation,one must pay annual franchise taxes to the state for the privilege of existing as an artificial entity, and one must observe all the forms and conventions of corporate existence. In other words, the sole shareholder cannot form a corporation and then never have meetings, never sign documents in the corporate name,take all corporate money for personal use without accounting for it on the books and records of the corporation, and generally behave as if the corporation did not exist.If the shareholder(s) behave as if the corporation does not exist, then creditors may be able to pierce the corporate veil and seize assets of the individual shareholders.

References in periodicals archive ?
First and foremost, a strong nontax business purpose for the incorporation would be strong evidence.
Also, the proximity of the COD income event to the incorporation is likely important.
269 would apply to the incorporation of an insolvent partnership that occurs contemporaneously with a COD income event.
Incorporations in Southern California went from 7,837 last year to 8,317, a 6.
In fact, if current trends stay in place, the number of California incorporations could pass 50,000 for the first time this decade,'' said Rick Rozar, CDB Infotek's president.
While processing an application for incorporation in Bermuda normally takes just two days, a review precedes it.