Incorporation
Why do business owners incorporate their businesses?
- - Limitation of liability/Protection of personal assets. The most important legal reason for incorporating a business is to protect the owners from the liabilities of the business. In other words, the creditors of the business are not able to successfully make a claim against the personal assets of the business owner. Owners of a general partnership or an unincorporated business are generally personally liable for the debts and obligations of the business (such as loans, accounts payable, judgments arising from litigation and payroll). In a corporation, the business owner is a stockholder, and stockholders are generally shielded from the debts and obligations of the corporation. Creditors are generally only able to pursue claims against the business and its assets, and not the stockholders or the assets of the stockholders.
- - Transferable ownership. Ownership in a corporation is in the form of stock. Stockholders own shares of stock. Absent agreement of the stockholders not to transfer their stock, a stockholder is able to transfer some or all of his or her shares of stock to another party without the consent of other parties, without complex legal requirements and without the transfer affecting the legal structure of the corporation.
- - Common Understanding and Acceptance of Corporations. Corporations are well-known in the United States and internationally. Entering into business negotiations, contracts or transactions with another business or with individual customers may be more successful if you are operating a corporation, as a corporate entity adds legitimacy to your business. Often times, international companies will prefer to deal with a Delaware corporation when transacting business in the United States, due to the common understanding and popularity of Delaware corporations.
- - Employee Benefits. Employee benefits and qualified retirements plans, such as health insurance and 401(K) retirement plans are easily established when operating a corporation, and often times the rates or premiums for insurance is less when utilizing a corporation.
- - Taxation. In the United States, corporations are often taxed at rates that are lower than that of the individual stockholders. Corporations may also carry forward losses from one tax year to a future tax year to offset such losses against the future gains (which will result in lower future taxes). Individuals are limited in the amount of losses that can be carried forward. Tax loss carryforwards may also be highly valued by a future acquiror of your business if you are operating a corporation. Stockholders of corporations formed in the United States may also be permitted to elect to make an “S Corporation” election. See www.FilingsMadeEasy.com/s-corporation.
- - Raising funds through sale of stock. Capital from investors can be raised for corporations easily through the sale of stock.
- - Perpetual Existence. A corporation typically can survive perpetually. Its existence does not end upon the death of stockholders, directors, or officers of the corporation, or upon the transfer of some or all of the outstanding stock to one or more new stockholders.
Filings Made Easy can help you form your corporation. The process is fast and easy. Please click here www.FilingsMadeEasy.com/incorporate-online to get started (or email us at customerservice@FilingsMadeEasy.com or call us at 888-237-3410).