CA Brijesh Baranwal
> There are a number of financial and legal advantages by operating an organization in corporate form. Organizing a business in corporate form allows a company to function independently from the owners of the business and one or more people may operate a company in corporate form in many places.
> Organizing a business as a company provides owners with personal asset protection. When a business is incorporated, its owners have limited liability protection against the company’s debts and obligations. This means creditors of an incorporated business may not pursue the business owner’s personal assets in an attempt to recover business liabilities and obligations.Owners of an organization operating in corporate form are liable for business losses and debts up to their investment in the corporation.
> Companies operating as an incorporated business may find it easier to raise money. Incorporating allows a company to issue shares in an effort to raise money, allowing a company to issue multiple classes of stock. This provides greater opportunity for a company to grow and expand by taking on more investors.
> Organizing a business in corporate form increases the credibility of the company. Customers, suppliers, and lenders may feel more at ease when dealing with a company. In addition, businesses organized in corporate form appear more professional in comparison to other forms of business. A business that takes the effort and money to organize a company sends a signal that the company is around to stay.
> A business organized in corporate form has unlimited life. This means the company may be in existence well beyond the lifespan of its original owners. A company will continue to exist, and will not be dissolved or cancelled when shareholders die or withdraw from the company. In fact, a business organized in corporate form will continue to operate in that manner, regardless of who owns it.
The Author is a Mumbai based, Practicing Chartered Accountant. In case of queries and suggestions, please contact. Mobile: 9312412020, Email: [email protected]
Disclaimer- This write up is only for awareness purpose and professional opinion may be required in specific cases depending upon the particular facts.