What are the mistakes associated with business incorporating or already incorporated ones?
Before delving into this, do you even know the meaning of Business Incorporation? Just like I explained in my previous post, Business incorporation is like a team of people from different walks of life who came together to contribute to same goal and development of a business.
These people are called Shareholders and the business owner is regarded as the Chief Executive Officer (CEO) of the incorporated business.
Why Do Entrepreneurs Incorporate their Businesses?
The answer is simple. The benefits associated with incorporated business is far fetched from the sole proprietorship one. We are in the world of competition and this competition faces businesses the most, apart from competitions, taxes can sometimes leads a running business into bankruptcy and some business owners had because of this reason close down their business.
But, some wise business owners who have foreseen all these issues had collaborated together to form an incorporated business. For more details about the Reasons why Most business owners incorporate their businesses, CLICK HERE.
Some business owners like you have had the right ambition of incorporating their businesses and, they implemented the ambition but unfortunately, things went out wrong with their businesses. Some business have closed down immediately after the business owner incorporated his/her business.
But, do you think they made the wrong choice of incorporating their businesses? NO! What happened is that they incorporated their businesses in the wrong ways.
Here in this article, I will explain to you, Five Mistakes You Must Avoid Before Incorporating Your Business. I do hope that after reading this article, you will learn and know how to avoid these mistakes. Although, the mistakes might seems meaning or not what writing on but for the same of beginners, we need to let them know just like the Christian book says the shrewd ones prepares before dangers.
Business Incorporating: 5 Common Mistakes You Should Avoid While Incorporating Your Small-Business
==>• (1) Lack of Preparation:
This is one of the big reasons why most incorporated business fails. You may think that you prepared well before taking action but there are something you didn’t prepared for that made your business to fail. A typical example is how to choose the best business name for your forthcoming business corporation.
Business name is very important when it comes to incorporation because, it will help you to build your brand, protects your right whenever you want to expand your business or investment. Above all, people across the world will know and recognizes your products or Services through your business name.
==>• (2) Underestimating the Shareholders’ Voting Rights and Shares:
This is another mistake you must avoid when you want to incorporate your business. Shareholders will be like the pillars of your business in the future after incorporation, you must be able to understand the type of Shares your business will offer to them, knows how powerful they will be with their Voting Rights.
When filling your business article of incorporation, you must state out all the things associated with shareholders’ power and how your business will be offering shares to shareholders.
Some incorporated Businesses who had ignored this very point regretted at the end of the day. Without proper clarification about your shareholders, your business may shut down suddenly especially when disagreement happened between either you (the CEO) and the most powerful shareholders or between the shareholders only. The funniest part is that, these shareholders may gang up and snatch the business from you if care is not taken.
In short, Do not Underestimate the Power of the Shareholders’ Voting Rights and Shares.
Remember that these shareholders’ power and voting rights are backed by the law irrespective of your location or country.
==>• (3) Selection and Hiring of Incompetent Board of Directors & Other Staffs :
This is another mistake some incorporated businesses made. Instead of hiring the professional and experienced workers for their business, they hires interns who knows nothing about working in their company. This brings a greater risk to failure of business than you think, how? While most of your competitors are using experienced staff members and you are using interns in your company, what do you expect? These competitors will just have to match over your business and step up.
Another one is that of BOD (board of directors). These directors are responsible for controlling your workers and their activities within your company. Selecting or appointing incompetent directors will brings a greater risks to your business even, if you have the world best team of workers.
Instead of focusing on the gain or benefits you can be entitled to after incorporating your business, deal with these minor issues first.
==>• (4) Improper Care or Inspection of the Corporation Records & Documents
The most important document you must take good care of, is your Business Financial Records and, all other documents shall be added unto it. In united states and some countries in the world, there is a law that incase an incorporated business is unable to present its financial records for two consecutive years, such corporation act is free to dissolve.
What does that mean? It means that the shareholders will have will have to gather another money for the sake of incorporating such business again *(if it happened that the incorporated business was dissolved).
Another thing that, the government may be forced to remove your business name from registered ones.
What risk could this bring to you? If the government removed your business name from registered ones, another business owner may took the removed business name and register it for him/herself.
Just imagine if the government remove Microsoft from Registered business names and luckily for another entrepreneur, he/she got it registered for himself. What do you expect? Bill Gates will loose his brand, reputation, profits and other things.
You must also take good care of other documents as well because, some of your competitors are looking for how they will steal your business ideas and implement it before you.
==>• (5) Failure to Register Your Business As Incorporation & Inability to Pay Due Fees:
Some business owners usually go through the risk of debt. Most of them knows the right thing to do but due the best reasons known to them, they refuses to do it.
An example is the payment of taxes and other fees. A company might refused to pay its annual taxes for ten (10) years and believe me, the government may not disturb the business.
But when it comes to a point where the company has huge tax debt worth millions of dollar, the government will be forced to collect the taxes from you or you should shut down your business.
Even, If you shut down your business, the government will still make sure that they collect those unpaid taxes from you.
Note that, it may involves seizing of shareholders’ personal assets.
Another big reasons is that most companies registered as sole proprietorship but all of sudden, they think of business incorporation which they did successfully but the point here is that, you should make sure that you re-register your business again after incorporation.
Before incorporating your business, make sure that those five outlined mistakes didn’t show up during your operation.