Benefits of Incorporating a LIMITED LIABILITY PARTNERSHIP/PRIVATE LIMITED COMPANY/ONE PERSON COMPANY
A Limited Liability Partnership (LLP) is a partnership firm in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore exhibits elements of partnerships and corporations. In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence. Section 2(62) of the Act, defines a “One Person Company” as a company which has only one person as a member. OPC is a Private Limited Company with only 1 shareholder, similar to a Proprietorship firm, where firm is owned and managed by an individual. A private limited company, is a type of privately held business entity. This type of business entity limits owner liability to their shares, limits the number of shareholders to 200, and restricts shareholders from publicly trading shares. All three of the above are registered under the Ministry of Corporate Affairs. And all these entities are incorporated and registered under respective laws and are distinct from their shareholders/owners.
Incorporate your business for investment opportunities. Whereas sole proprietorships and standard partnerships are limited as to how they can raise capital for their business, a corporation can raise capital through selling of corporate stock, or interest, in the company. Investors are more readily attracted to a business opportunity where their exposure to liability is at a minimum. Today, Angel Investors or Venture Capitalists or other investors prefer investing in an incorporated entity, to feel safe and assured while investing in any new business.
Credibility is another benefit attached to an entity that is incorporated. Customers and other businesses usually feel more secure engaging in transactions with a corporate legal entity because it instills a feeling of confidence in the company. For investors and lenders to a business, it gives them knowledge that their investment assets are afforded better legal protections.
The incorporated business has perpetual duration unless stated otherwise in the articles of incorporation. This unlimited life allows the entity to continue to exist and conduct business, even following the untimely death of an owner, or the decision by individual owners to discontinue their stake in the entity.
In order to enjoy maximum liability protection from lawsuits, the company or corporation must be established, operated, and maintained properly, with all of the “operating formalities” properly implemented and adhered to. Since the shareholders are not personally responsible for the corporation’s obligations, they can be protected from corporate litigation. Thus, if the company is involved in a lawsuit, the shareholders’ personal homes or assets would not be at risk.
Incorporate your business for tax benefits. There are substantial advantages, and savings, available to an incorporated business. One can also write off all his medical expenses, including prescriptions, through his corporation and one is able to write off 100% of his insurance premiums versus the mere 30% write-off available to partnerships or sole proprietorships. These are just a glimpse of the types of advantages available by establishing your company as a corporation.