If you are ready to start your business, you may be wondering whether or not to form a corporation. Many people incorrectly assume that forming a corporation takes a lot of time and is too expensive. However, the truth is that this business entity is not difficult to set up.
Comparing the benefit of a corporation to the perceived disadvantages, it is clear that the entity is beneficial in many ways. In many cases, the benefits of a corporation are not available to general partnerships and sole proprietorships. Some of the benefits of incorporation include:
Limited Liability Protection
The members that own a corporation are referred to as the owners. When you have a corporation, you will benefit from limited liability protection. Therefore, any debts that the business has are not tied to the owners. Should the business be sued, the creditors cannot go after the personal property of the shareholders.
On the flipside, if you have a partnership or sole proprietorship, your personal property is attached to the business. In such a case, the personal property of the owners of the business can be attached to the company and auctioned to recover debts.
You can also form a corporation to benefit from various tax options. There are various tax deductible options shareholders of corporations have. For example, shareholders are allowed to claim tax deductions for expenses such as life insurance. Self-employment taxes also attract various tax deductions.
To better understand all the tax benefits of opening a corporation, you should consult a qualified tax accountant.
Make Your Business More Credible
Many company prefer doing business with other companies rather than sole proprietorships. Majority of clients will not take you seriously if you are running a sole proprietorship. When it comes to doing business, prospective clients would want to know that they are working with a legal, established company. When you have a corporation, closing customers for your products or services will be easier.
While shareholders own a corporation, its operations does not depend on them. One of the features of a corporation is that it has unlimited life. For example, even when some shareholder pass on or decide that they no longer want to be part of the corporation, the business’ operations will still continue. On the flip side, with a sole proprietorship, the business will come to a close when the owner withdraws their interest.
Easy Transfer of Ownership
Transferring a corporation is easy. The ownership information is provided for in the articles of operation of the company. However, there are special restrictions for S corporations. Contact a business attorney to find out about the transfer options of a corporation.
The above are five benefits of forming a corporation.