Why Incorporate A Business?
Benefits of Incorporation. Why Incorporate?
- Most businesses will benefit from operating under a corporate
1. The primary benefit of incorporating is to
protect your personal assets from potential liabilities that could
occur in your business. Without the protection provided by a corporation,
creditors or other claimants of your business can attach personal
assets including garnishment of personal salary, attachment of
personal bank accounts, attachment of your home in most states,
and seizure of other personal assets,. If you are operating as
a sole proprietorship or as a partnership your personal assets
are vulnerable. By forming a corporation and following all corporate
formalities, you insulate yourself from personal liability. The
only amount you have at risk is property and investment that you
put into the corporation.
2. Another benefit incorporation is that it offers
continuity of existence. A corporation is a separate legal entity
that has a separate "life" from its individual owners.
Upon the death or retirement of an owner, the corporate entity
can continue on. Shares of ownership may transfer upon death or
by sale. But the business entity will continue in existence until
it is dissolved.
3. It is next to impossible to raise capital investment
through a sole proprietorship or partnership. If your business
is considering investment capital, it is necessary to do so through
a separate legal entity. Investors tend to shy away from partnership
investments because of a risk that their personal assets will
be subject to the liabilities that may arise from the business
in which they are investing.
4. There are also potential tax advantages to
operating through a corporation which you may wish to discuss
with your accountant.