What does incorporation change for the owner?
Incorporation creates a company that is a person separate from its owners. The company owns its assets and owes its debts. The owners are shareholders. A business that stays a proprietorship is not incorporated, and the law does not require every business to take that step.
No. A proprietorship is the owner and is not a company. A partnership firm is not incorporated either.
What changes?
The company can hold property and sue in its own name. It continues when a shareholder changes. A shareholder is not personally liable for an ordinary debt of the company. How a private company is formed is on the private-company page.
When is it not required?
A person who trades in his or her own name is a proprietorship. That form is on the proprietorship page. The owner remains liable for that business. Choosing a company is a decision about liability, investors, and filings. It is not a condition of starting work.
What does it not include?
The certificate does not include GST, a trademark, or a state shop registration. Those gaps are on the post-incorporation page. Incorporation also does not grant a tax exemption or Startup India recognition.
Frequently asked questions
Four questions cover who must incorporate, personal risk, GST, and tax.
Must every business incorporate?
No. A proprietorship is the owner and is not a company. A partnership firm is not incorporated either. Incorporation is the choice of a company or, for a different Act, an LLP.
Does incorporation remove every personal risk?
No. A personal guarantee, a wrongful act, and unpaid tax that the law places on an officer can still reach a person. The company’s ordinary trade debts stay with the company.
Does the certificate include GST?
No, unless GST was applied for inside the incorporation form. A trademark and a shop registration are also separate.
Is incorporation a tax exemption?
No. The company is taxed as a company. Startup recognition and any tax deduction that follows it are separate applications.
Sources
A company comes into existence on its certificate of incorporation under the Companies Act, 2013. A proprietorship does not. GST and a trademark are later filings.