What Is Incorporation? The Definition of Incorporation

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What Does Incorporation Mean?

Incorporation is a legal process involving the registration and formation of a limited company. By law, a limited company is a business entity that is separate from its owners. You can run a business enterprise without having a limited company by becoming self-employed, but you are not a legally-defined company until you incorporate your business and give it a registered name. If you don’t incorporate your business as a limited company, you as the individual are the business.

Why Incorporate a Business?

By incorporating your business, you establish the company as a registered corporation. In doing so, you can access several important business management tools and processes not available to sole-trader business owners. Through incorporation, you create a limited liability organisation that can employ people, make its own tax payments, have directors, shareholders and lots other benefits.

Click here to learn more about the advantages of limited companies!

What to Know About Incorporation

If you want to operate a limited company, you must incorporate it through Companies House. This is required by law, as part of the Companies Act 2006. Your business can be brand new, or it can have existed before as part of a self-employed enterprise or partnership.

You will find incorporation occurs in most economies around the world in some form. Traditionally, an incorporated business receives the identifier of limited, LTD or Inc, but it doesn’t have to take this title. Often, a business will be incorporated using a suffix such as Inc, that is subsequently dropped as part of branding and marketing.

For example, the incorporation of tech giant Apple is under Apple Inc, while rival Microsoft is actually registered as an incorporated business, Microsoft Corporation.

How Do You Incorporate a Business?

Anyone can incorporate a business. Incorporation occurs through Companies House, the official government department that manages the formation and dissolution of companies, as well as keeping records of active incorporated businesses.

To incorporate your business, you must register a company name, alongside who the owner/owners of the business will be, and a series of documents of formation that provide the extra details like rules of operation.

Registration is relatively straightforward if you know what to do. If completed properly the first time around, you could see the incorporation of your business within a few days of submission.

Want in-depth advice on how to open an LTD company? Read our blog!

Incorporation vs Corporation: What’s the Difference?

When you are incorporated, you become a corporation. Incorporation is the legal process of becoming a corporate entity, while a corporation is a business. These terms are related, but they are not counters or opposites or even different types of business.

An Example of Incorporation

In the early 1970s, a young Steve Jobs met with a young Steve Wozniak. They sold a modest amount of their new telephone inventions as self-employed individuals, splitting the profits between themselves. A few years later, the pair reconnected on a new project, after Wozniak revealed he’d been developing his own computer.

Jobs was impressed with the concept and convinced Wozniak they should sell the computer as a product. This time, they decided to make their business official. Instead of just selling products under their own name, they’d start a company and branded the products through the company.

In 1976, Steve Jobs and Steve Wozniak, along with Ronald Wayne, incorporated their business into Apple Inc.

There is a lot of fanfare around the legendary technology company today, but at the time this was a very simple act. The big names behind this historic event make it seem all the more impressive, but if the computers hadn’t become the success they are today, then this act of formation still would have occurred.

Incorporation can be the humble beginnings of an epic rise to economic dominance, or it can simply be one or more people starting a registered organisation. Replace Jobs and Wozniak with a dog walker and dog groomer who come together and incorporate their business into a doggy care service and, as far as incorporation goes, the result is the same — a newly registered company.

 

Mint Formations are your experts in the incorporation of British businesses. Contact our team today to discuss your formation needs!

 

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Raj co-founded Mint Formations with business partner Andy Tree in 2017. Mint formations is established to nurture small UK businesses and enable exciting new opportunities for quick growth. As a successful entrepreneur, Raj knows how to start and run a business. He currently resides as a board member of seven successful companies across the world. He is best known for founding Integra Global Solutions, specialists in robotics, automation, and business process optimisation.