Incorporating a business

A corporation is a legal entity that is entirely separate from its business owners. To form a corporation, the business owners must file Articles of Corporation with the appropriate state authorities and pay corporation fees. In addition, the business owners must pay initial franchise taxes. The process is not complicated and can be researched and completed online. Many businesses do so without an attorney, however, an attorney may be desirable if the business owners are unsure as to whether incorporating their business is in the best interest of the company and everyone involved.

There are several advantages to being an incorporated business. The biggest advantage is that there is less personal liability to the shareholders and owners of the business. If the business were to go under, the shareholders’ and owners’ personal assets would not be used to liquidate the corporation’s debts. Furthermore, the life of the corporation is not dependent on the owners. If an owner were to die or choose to sell their interest in the corporation, the corporation would continue to exist and function as normal. The ownership of corporations is, therefore, easily transferable. Capital for a corporation can be raised through the sale of stock.

The main disadvantage of a corporation is the double taxation that occurs. The corporation is first taxed on their income, then as the shareholders profit, they too are taxed for that income. The expenses and record keeping involved with incorporation is another disadvantage. For this reason, only large businesses typically choose to incorporate.