The Advantages of a Corporation

When you are starting a new business or considering the re-branding of an existing one, one of the first things you need to think about is legal structures and corporate governance.

It is a well-established principle that companies should be run with a focus on the long-term interests of their employees, customers and the general public. But to achieve this, you need to ensure that your business is structured properly, with a sound governance framework and robust legal position.

How Can Legal 법인설립 Help?

Traditionally, setting up a business has involved a lot of paper-based legal work. You need to set up a company name, register a business with the local government, file annual returns, consult a lawyer about your corporate structures, and so on. In today's world, a business can be set up in an instant with the click of a mouse, but all of these steps still need to be considered.

As a new business owner or re-branding existing one, you will soon realize that the more you know about corporate law, the better your position. Even beyond the practicalities of getting your business up and running, there is a lot of information to be found in books, or on the Internet, that you can use to better understand the legal principles governing your company.

An expert business lawyer can help you work through all of the legal issues surrounding your business, from setting up your corporate structure to providing advice about your contracts and the general liability risks you should be aware of.

Why Should You Incorporate?

The best advice for a new business is often counter-intuitive, but nonetheless true: it is never too early to seek legal advice, and it is always better to be over-ready than under-ready. When you incorporate your business, you are taking the first steps to establish your legal identity, and to ensure that it is properly represented in the event of a dispute.

Establishing a legal identity for your business will also prevent any uncertainty about ownership, and the ability to pass on trade secrets and intellectual property, as you will be able to protect these assets with a legally binding agreement. Additionally, incorporating your business will allow you to raise funds from private investors and high-net-worth individuals, who may see your company as a safe investment due to the protection of personal assets and the liability limits available in your state's insurance program.

The Advantage Of Having A Corporation

The main advantage of incorporating your business is that you immediately attain limited liability, as the owners of a corporation will be personally responsible for its debts and legal obligations, up to the value of their ownership stake. This is a major benefit for businesses seeking to raise funds, as it allows them to attract more investment capital, as the liability is effectively limited to the value of their ownership stake. The liability shield provided by incorporation also presents a major obstacle for creditors and business partners, as it prevents businesses from being forced to pay outstanding debts, or face the consequence of being personally liable for those obligations.

Another advantage of having a corporation is that you can create an internal, limited-liability company, which can be the holding company for your business, or a sub-company within the corporate structure. The reason for this is that corporations are legally separate entities, with their own liabilities and obligations, and you can create them for any legal purpose you deem necessary. The fact that they are separate and distinct from the individual members of the corporation means that you can avoid personal liability for the activities of the company, provided that you perform those activities in a lawful manner, and within the scope of your corporate responsibilities.

The Main Difficulties In Setting Up A Business

There are several disadvantages to establishing a business as a corporation rather than as an individual or partnership. One of the major difficulties is complying with the separate legal identities of the company and the individual owners. In the case of a business owned by five individuals, for example, each of the five owners will be considered a separate person under the law, with their own individual legal identities, and these will have to be reported, along with all of the pertinent details about the business. This can be a complex administrative task, which is why it is best to avoid this type of structure if possible, and instead opt for a business partnership, or individual ownership.

The fact that a company has five shareholders, rather than one, means that they must file five separate tax returns each year, rather than just one. Additionally, the members of the company are also the members of the board of directors, which means that they will have to attend five separate board of director meetings each year, rather than one.

Raising Capital

One of the primary reasons why businesses incorporate is to gain access to investment capital, as it provides the business with a more stable platform for fundraising, and greater chances of securing credit, as the business's limited liability status is likely to make it more attractive to lenders and brokers. Most large banks and brokerages will only provide credit to corporations, as they do not want to be held liable for the debts of a company they provide capital to. A good legal counsel can help you work through the corporate formalities necessary to raise capital for your business.

How To Structure A Business Contractually

Another important factor to consider when structuring a business is how contracts are handled within the business. It is usually best to avoid using third-party contractors and intermediaries, as these individuals have their own liability exposure, and therefore the responsibility to protect your business's interests will fall on you.

When you are entering into a business contract with a vendor or a contractor, it is usually advisable to use a contractual clause that shields you from personal liability, as you never know when an intermediary may turn sour and start dragging you through the courts. Instead, opt for a contractually protected business.

Protecting Intellectual Property

Finally, as a business owner, or person in charge of a re-branding exercise, you should be aware of the intellectual property assets that are associated with your company, from its name and branding to its website and social media accounts. When you re-brand, you are in effect creating a new company, with new intellectual property, and therefore you should take steps to protect this intellectual property, which is not only owned by the company, but also by its shareholders and directors. The simplest way to do this is to register the company's name with the copyright office, as this grants rights to the copyright owner, in return for a small payment. Additionally, you can register the logo and all other brand assets with the trademark office. These rights will afford you legal protection against anyone who makes a claim against your company's goods or services, on the grounds that they are using illegal or infringing trademarks.

To sum up, incorporating a business is a good idea, as it provides the business with greater stability and protection, and allows the business to raise more funds through investment. However, before you take this step, it is important to consider all of the pros and the cons, as this is a legal decision that will affect the business for years to come.