As an entrepreneur of a startup, besides working on your business long term and short term goals, usually the next thing in your mind you would ask yourself: “When will be the right time to incorporate your startup company?”
But why doing that? It’s simple. It will make it simple for taxation, personal liability and company fundraising in the long run when you’re actually serious about making your startup a success.
For company incorporation, the first step is to decide on the legal structure. The structure should be designed based on the requirements of your startup. The structure is important in a good way: It affects how your startup does business, how the taxes are filed, and more. Consider some of the business structures:
- Limited company
- Sole proprietorship and partnerships
- Branch Office
- Company limited by guarantee
- Company limited by shares
The Companies Registry is the entity who is responsible for incorporating companies. You’ll have to register the company with the Companies Registry.
During the company registration, many startup owners would opt for a limited company structure. Limited companies have a few advantages and are a separate legal entity. For this reason, it offers protection of personal assets from many unforeseeable business risks.
An example of such is when the court discovers your company owes 10,000 dollar to one of the creditors, but your company is not able to pay this debt. You as a person does not owe the debt. The company is the entity who owes the debt. In this case, the properties under your own name as a person entity will not be taken away by the court or the creditor.
Regarding fundraising and transfer of ownership (when these may likely happen somewhere down the road of entrepreneurship), things would be more straightforward.
There are limitations to limited companies. For example, if as a shareholder of the company somehow you deliberately commit an illegal operation or fraud, you’ll be liable for the consequence according to the local laws.
The documents or materials to prepare for setting up a limited company are simple and should be easy to obtain. You’ll need to provide a copy of identify documents of the directors and shareholders, and their proof of address i.e. the utility bill statements, or bank statements.