What process does a business undergo to become a formal company?

The process a business undergoes to become a formal company is known as incorporation. Incorporation is the legal process through which a business entity is formed and recognized as a separate legal entity from its owners. This means that the company can enter into contracts, sue or be sued, and own property in its own name. It also provides liability protection to the owners, meaning their personal assets are typically safeguarded against business debts and legal actions.

Incorporation typically involves filing specific documents, such as Articles of Incorporation, with the relevant governmental authority, often along with paying a fee. This signifies that the business complies with legal requirements and operates under a formal structure with its own governance rules, such as a board of directors.

Registration, licensing, and certification are related concepts but do not specifically define the process of officially forming a company. Registration may refer to the act of recording a business's existence with government authorities but doesn't inherently create the separate legal entity that incorporation does. Licensing usually pertains to obtaining permission to operate a particular type of business, while certification may involve meeting certain standards or qualifications for specific industries or practices.