Jacques Mattheij

Technology, Coding and Business

Incorporation

Incorporation is the act of creating an entity that has a life outside yourself. The connection between a corporation (a legal person) and real people is usually in the form of shares.

There are several reasons why incorporation is usually a good idea, and not many why it isn’t, so most people that go the consultancy route will at some point incorporate.

Depending on your geographical location your choices will be more or less varied, but in general almost every country has a general palette of choices:

  • single person operating as a company

    This is not really a company yet, but it is usually the prelude to one. You can register a ‘trade name’ and you can represent yourself to your (prospective) customers under this tradename. In most countries (check!) it allows you to open bank accounts and to buy at wholesalers. You may need to register with the local equivalent of the ‘chambers of commerce’.

  • A limited liability corporation (LLC)

    This is a big step up, but for tax and liability reasons many small business operators decide that this is what they want.

    In some countries the costs for such a construction are significant, make sure that the expense is warranted. And also realize that as the sole-shareholder of an LLC or comparable construct you are usually still personally liable until some of those shares change hands.

  • Other local variations (c-corp, and so on)

    Depending on your future needs it may be enough - or mandatory - to go with a different legal construction, ask a local business lawyer or someone that already has lots of experience in your intended field of activity about the pros and cons.

  • a collective (several people working together but not actually incorporated)

    This is the way plenty of professional groups are structured, but there are in some countries serious drawbacks to this way of working together, such as potentially being responsible for each others debts. This requires a lot of trust.

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