A corporation
is a business entity separate from its owner(s). Therefore, if
your business is incorporated, all of your personal assets are
shielded from any business debts or other claims against your
business. You do not expose any of your personal holdings and,
in most cases, incorporation will allow only your capital investment
in the business to be seized in the event of a judgment against
your business. This is one of the most popular and attractive
aspects of incorporation.
Of course,
tax breaks are very enticing as well, and incorporating can give
them to you. In a corporation, health insurance, life insurance,
travel and entertainment expenses often can be 100% tax deductible.
Also, corporate tax rates are usually lower than individual rates.
In addition, retirement plans, profit sharing and stock-option
plans can be established in corporations in order to lower taxable
income.
The above
benefits will be an advantage to you, but you may also find that
investors are attracted to them as well. Corporations can raise
capital through the sale of stock and most banks and venture capitalists
will be more likely to invest in your business if there are advantages
for them and if they are not going to be liable for possible damages
or lawsuits.
Image
is everything…Well, maybe not, but if your company does not
have a professional image, your company does not have a chance.
When you incorporate, you send a signal to all that you are serious
about your business and its success. Corporations look professional
and appear bigger, whether there is one shareholder or 1,000.
Investors will be more attracted, customers will be more at ease
and competitors will be more nervous.
Unlike
other business structures, such as partnerships, the owners of
a corporation can be protected from any undesired publicity. Only
the officers of a corporation, not its stockholders, are on public
record. In a corporation, it is possible to have a business, yet
maintain your personal privacy. Anonymity is another feature that
may be attractive to potential investors.
A corporation
is the most enduring of all business structures because it is
a separate entity from its owners. It can outlive its original
ownership, whereas other structures, such as partnerships or proprietorships,
will likely end or become mired in legal entanglements in the
event of an owner's or partner's death. This can be a very important
consideration in the area of estate planning.
Because
ownership is determined through stock holdings only, business
does not have to be disrupted to change ownership in a corporation.
This can be accomplished easily and effectively through the sale
and transfer of stock.
