Often times starting a business or choosing an investment vehicle can be a confusing
task. Incorporating your business or investment can be the best choice you make
in determining your financial success. The many benefits of incorporation make it
a mandatory first step!
One primary benefit is LIMITED LIABILITY. If you maintain the corporation's legal
status properly, and avoid personally guaranteeing the corporation's obligations,
your corporation, and not you, would be solely responsible for its own obligations.
The single most important reason people use the corporate form of doing business
is to safeguard the personal assets of the owners -- the shareholders (or stockholders)
of the corporation -- against potential claims of creditors. Sole proprietors and
general partners in a partnership are personally liable for all debts and obligations
of the business, such as loans, accounts payable, and defective products. Stockholders
typically are not liable for ordinary debts and obligations.
Other potential benefits of incorporating (even for one-person operations):
Corporate identity: the sense of image, stability,
sophistication, credibility, and
permanence results from incorporating, no matter if you start with
one person or several.
Raising capital: you have an inherently enhanced
ability to acquire capital. A Corporation
gives a potential creditor the impression that you are a knowledgeable
professional, and
this gives the creditor a whole new outlook on your business.
Continuous life: a corporation can survive its founders,
provided it complies with ongoing
state and federal paperwork and pays the annual filing fees.
Tax savings: corporations are taxed at a lower rate
than individuals. Also, they can own
shares in another corporation and receive corporate dividends 80%
tax-free.
Click here to learn about Business Structuring
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