Incorporation is the legal process through which a business entity becomes a corporation. This process provides the business with a distinct legal identity separate from its owners.
5 Must Know Facts For Your Next Test
Incorporation allows a company to issue stock to raise equity financing.
A corporation can enter into contracts, sue and be sued, and own assets in its name.
Incorporated entities benefit from limited liability protection for their shareholders.
The incorporation process involves filing articles of incorporation with the state government.
Corporations must adhere to regulatory requirements such as holding annual meetings and maintaining corporate records.
Review Questions
What are the primary benefits of incorporating a business?
Which document needs to be filed to begin the incorporation process?
How does incorporation affect the liability of shareholders?
Related terms
Stock Issuance: The process by which a corporation sells shares of its stock to investors.
Equity Financing: Raising capital through the sale of shares in an enterprise.
Limited Liability: A legal structure that limits an individual's financial responsibility to the amount invested in a corporation.