The incorporation of companies is when a particular institution acquires, at once, the entire operation of another company, including the goods, assets, technologies and specialized professionals, causing the incorporated company to cease to exist. With this, all labor obligations are also transferred. For example, all previous labor processes are inherited. In addition, employment relationships are preserved. In the eyes of the law, and in most cases, the incorporated company is an entity distinct from the individuals who compose it. With its administrators, it can take steps on its behalf: such as signing contracts, opening a bank account or paying salaries to its employees.
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How does this operation work?
A company incorporation process must be done with a lot of planning and after a lot of analysis. This is because, as you noted, the merging institution inherits a number of responsibilities and obligations from the merged organization.
The operation must be approved by the partners of both the company that will be incorporated and the company that will be acquired. The incorporation must also undergo a balance sheet analysis.
Also, the company’s assets, as well as the documentation of the company that will be extinguished, need to be in order and be analyzed by an expert.
When the corporate transaction is approved, the acquired company must cease to function and exist. Therefore, after completing the process, the developer becomes the owner of all the equity and capital stock of the former company.
The procedure also involves carrying out registrations to make the incorporation operation public to the entire population. As it involves following what the specific legislation demands, it is always advisable to have the help of a professional specialist in the subject to avoid errors and losses, which can harm or cancel the entire process.
What are the advantages of incorporating companies?
This procedure has certain advantages. See some of the benefits below!
Enables increased market dominance
The incorporation of companies can be a strategy to increase visibility and strength in the market or in a specific niche. This is because, in a way, they are two societies joining forces, but with the difference that in the end there will only be one left.
Helps to lower production costs
The acquired production processes can help to reduce the costs of the company that remained. Thus, it is possible to increase the profit and especially the economic power.
Many incorporations can help bring administrative, tax, operational and even legal gains to an organization.
Reduces the tax burden
The incorporation could reduce the tax burden, not least because there are no longer two companies. In addition, if the operation is carried out with a company belonging to a sector with tax benefits, the business can become even more profitable.
Reorganizing a group allows for tax reduction, known as tax avoidance. Some activities have tax benefits, this makes the business more profitable. For example, companies in the renewable energy production sector have a number of benefits in the country.