Corporate Services

Why Incorporate

Deciding on how to structure a business whether as a sole proprietorship or a company is one of the most important decisions and so each business should carefully assess the benefits of forming a company before moving forward.

Separate Person

The best way to understand a company is to imagine it as a separate artificial person (with limited rights and privileges). Incorporating a business is essentially creating that separate person thereby making the business separate from the owner (in a sense, the business has a life of its own). As a separate entity, the company exists independently from the shareholders/owners and its employees. Regardless of what happens to the shareholders, or the directors, or the employees, the company itself continues to exist in perpetuity until a time the directors and shareholders decide to dissolve it. In a sole proprietorship or general partnership where the owner(s) is the business, what affects the owner may affect the business. Any personal debt or liability of an owner or partner allows the creditor(s) to pursue the assets of the business whether or not the debt or liability has any relation to the business itself. Furthermore, personal bankruptcy of an owner or partner will directly impact a business by opening up its assets to any creditors the owner or partner is liable to. By incorporating a business, the personal finances of an owner or partner remains separate from the finances of the corporation and allows the business to continue without disruption. In the event of an unfortunate death of an owner or partner, the business is generally dissolved regardless of the wishes of the owner or partner(s). All of this could easily be avoided by incorporating the business as a separate entity.

Flexibility

Regardless of the reasons for leaving the business, incorporation allows the free transferability of interest from one person to another. Generally in a partnership, a partner cannot transfer his/her interest in a business to another without the express consent of all other partners. If a partner still decides to leave the partnership against the will of the other partners, the partnership is automatically dissolved. Incorporating a business removes this limitation by allowing shareholders/owners to freely transfer his/her interest to another without the unanimous consent of all other shareholders. Small businesses may see the restrictions against transferring shares as a good thing and may want to control how a shareholder may transfer his/her interest and to whom. Incorporation allows this flexibility as well. The free transferability of shares is a default rule, but by no means is it mandatory for all incorporated businesses. Businesses have the option to place restrictions on the transferability of certain shares.

Limited Liability

One of the greatest benefits for incorporation is its limited liability against the shareholders. As mentioned above, any debt or liability against a specific shareholder remains separate from the corporation. Likewise, the inverse is similarly true. Any debt or liability against a company does not open the doors of shareholders’ assets to the creditor(s). The shareholder’s liability in any company debt or liability is limited to what the shareholder invested (unless there is fraud). In a sole proprietorship or general partnership, the owner(s) and/or general partners remain completely liable to any debt or liability placed against the business. If a business is unable to pay a debt, the creditor can attack the assets of an owner or partner until the debt is satisfied. In a company, a creditor can only attack to the extent the shareholder invested into the corporation (unless there is fraud). This allows the company to make business decisions without the risk of endangering the personal assets of its shareholders beyond what was invested. Risk is a necessary element to a successful business. Anything that minimizes the risk to investors makes the business more attractive, and so the limited liability of an incorporated business is quite valuable.

Corporate Services

Basic Corporate Administration Services provided by a Corporate Service Provider will typically include:

• Maintaining the minute book of the company including but not limited to constitutional documents, regulatory licences & certificates, shareholder and board meeting minutes, resolutions, proxies and notices
• Maintaining the Register of Shareholders and Register of Directors and Officers
• Providing the Registered Office
• Initiating annual filings, payment of annual government fees and facilitating compliance with general statutory requirements
• Maintaining originals and/or copies of all material agreements entered into by the company
• Facilitating compliance with any reporting requirements in respect of Anti-Money Laundering and Anti-Terrorist Financing in accordance with Bermuda law
• Preparing all requisite standard proxies, notices, share transfers, agendas and minutes with respect to Board of Directors, Committee and Shareholder Meetings each year and undertaking all other statutory duties including the holding of Annual General Meetings
• Preparing Certificates of Incumbency, certified resolutions and Secretarial Certificates of constitutional documents, as and when required
• Providing a Secretary of the company to attend any physical or telephonic Board, Committee or Shareholder meetings in order to record and prepare minutes
• Following good corporate governance practices

BeesMont Law provides full legal services including advising on structuring, corporate governance, and regulatory matters.

Please feel free to email us with any queries you may have – we are here to give you the time and attention you deserve.