One of the most importance decisions a company can make is selecting how to organize its business. Incorporating is perhaps the best way to go, but for some companies, it can be an unnecessary option. For some on the other hand, it can be beneficial, if done correctly. Therefore, it is vital to first understand the benefits of incorporation, how it works, and what the necessary steps and requirements are to avoid wasted time, money, and effort.
- Decide Where You are Going to Incorporate
Since each country makes its own laws, you’ll want to be aware of the laws and tax implications both in the country or state you incorporate in, and the region in which you’re doing business.
You might prefer to incorporate outside your home county for lower taxes or easier incorporation procedures.
But if you incorporate your business in another country you still must meet your obligations in your home country.
Contact Bitala & Co. once you have decided on where you will incorporate to know what the fees and requirements are, as they differ by country.
- Choose the Business Entity Type
There are several types of business entities, namely: sole proprietorship, general partnership, corporation, limited liability company (LLC), limited partnership, and limited liability partnership. Each type offers its own advantages and disadvantages.
Be clear on what you want your business to achieve. If you want to operate it on your own, go for a sole proprietorship. If you want one or two partners, go for a general partnership. Note that for these two types, you are accountable for the company’s debts and liabilities. If you want zero liability, go for a limited liability company, or a limited liability partnership.
Enquire from Bitala & Co. and determine the pros and cons of each business entity type to help you decide.
- Select a Name for Your Business
The name of your business is a crucial element as it can spell out the difference between your business becoming successful or not.
The name should not be difficult to remember, spell, or say.
When thinking of a name, ask yourself, will this name appeal to my target market?
Does it express what my business offers?
Does it manifest the brand image and the personality that I seek to create?
Will it carry my business for years to come should I decide to expand or shift attention?
- Determine the Availability of Your Proposed Corporate Name
Make sure your name is legally available. A corporate name is not the same as a trademark, even though many people use them interchangeably.
Check if someone has “yourname.com”.
Engage Bitala & Co to find out if your proposed name is available for use as a corporate name or if it contains any words which are not allowed.
Check the yellow pages in your location for similar names.
If you are planning on operating in not just one state, make sure to check in all states if the name is available for registration because the requirements, details, and appropriate offices for registration may differ depending on each country’s laws. Once your proposed name has been established to be available, reserve it with the country’s company registry and pay the corresponding fees.
- Gather the Information Required to register your business
Some information is necessary before you can file for incorporation. Make sure they are ready prior to filing to avoid wasted time, money and effort.
Finalize the name and address of the business.
Finalize the description of your company’s business activity.
Prepare the complete names and addresses of each shareholder and director.
- Hire Bitala & Co. Advocates (Recommended)
It is highly recommended to hire Bitala & Co. to deal with your business’s articles of incorporation. The laws and the required paperwork can be rather complex and in the absence of an expert, you might commit mistakes that can only lead to serious problems and financial trouble. Do not risk your stake in your business by filing or drafting paperwork incorrectly.
Hire the services of Bitala & Co. Advocates. They are a reputable law firm with operations across East Africa and have an excellent reputation in dealing with corporate law.
- Enter into a Pre-Incorporation Agreement
A Pre-Incorporation Agreement must be prepared and signed by all incorporators before a company can be formed. Even if there is just one incorporator, this document is still required.
This document must contain the following:
- Agreement of every incorporator to take at least one share of the company
- Each incorporator’s signature opposite his/her complete name
- The date when each incorporator signed the agreement
- The quantity of shares of each class that each incorporator will take.
Your company must keep its Pre-Incorporation Agreement as part of its official records.
- Draft the Articles of Incorporation
The Articles of Incorporation is the main legal document needed to incorporate a business.
Make sure that the following are included: the corporate name, the name and address of each incorporator, the address of the corporate office, the name and address of the registered agent, and the quantity of shares the business is authorized to issue (and in some states, the par value of each share).
It’s recommended to hire Bitala & Co. to draft the Articles of Incorporation for you.
Draft the Initial By-Laws/Memorandum of Association
A corporation’s By-laws are the rules which govern the internal regulation and administration of the business. The incorporators or the board of directors must adopt the initial by-laws. These by-laws set up the vital aspects for daily operation of the business.
All the provisions in the by-laws must be consistent with the Articles of Incorporation or the law.
- Draft the Shareholders Agreement
A Shareholders Agreement is a document detailing the rights and duties of the shareholders and of the corporation. It is a contract and can include fundamentally any provisions that do not go against the state’s laws and any other relevant laws. This contract is important because it outlines the right and duties of the shareholders among each other and some responsibilities of the corporation to the shareholders that are otherwise not included in the By-laws.
Include dispute mechanisms, restrictions on the authority of the Board of Directors, the shareholders’ information privileges, non-competition responsibilities, and voting privileges or agreements among shareholders.
Include limitations on voluntary stock transfers (that is, selling stocks to a third party), and involuntary transfers (such as a shareholder’s divorce, bankruptcy, or death).
- Designate a Registered Agent (Optional)
All countries require an incorporated business to designate a registered agent, which is the person who accepts tax and legal documents on behalf of the business.
The registered agent must have a physical valid address (PO Box addresses are not accepted) in the state where the business is incorporated.
The registered agent must be accessible at the said address during standard business hours.
- Register the Company and Pay for the Incorporation Fees
Once a corporate name has been reserved and the necessary documents have been prepared, you can proceed to file for incorporation with the government and pay the appropriate fees and submit all requirements.
To avoid wasting time and effort, it is best to enquire from Bitala & Co. for a detailed list of the requirements and fees.
Double check if you have all the necessary paperwork.
- Apply for and Acquire Other Necessary Permits & Licenses
If you plan for your business to enter a venture that would require a permit or a license, make sure to apply for those as early as possible.
Apply for a business license. This is required before you can operate your business.
File for a tax identification number (TIN) with the country’s revenue authority service for tax purposes.
Find out by enquiring from Bitala & Co if other permits or licenses are needed such as Employer Identification Number (EIN), etc.
- Prepare the Written Resolutions of the Board of Directors and the Shareholders
It is necessary to get an official written list of resolutions of your company’s directors and shareholders to discuss crucial elements of your operations.
Hold a separate meeting with the Board of Directors and with the shareholders.
During the meeting, discuss the by-laws, allotment of shares, designation of officers, approval of corporate seal (if any), fiscal year end, appointment of permanent directors, accountants, or auditors, and any other resolution of a director that may be appropriate. Prepare the minutes of each meeting.
Prepare a written list of the resolutions of the directors and of the shareholders.
- Issue Corporate Stock Certificates
Stock certificates are official certifications that a company issues to its shareholders as proof of how much stake they own in the business. Until the stock certificates have been issued, a corporate should not start doing business yet.
TIP: Include the following in a stock certificate: the name of the corporation, the state where the business was incorporated, the name of the recipient, and the quantity of units issued.