Why should you incorporate your business?

There are several good reasons for any person to consider business incorporation (e.g. setting up a corporation or forming an LLC) and switch from sole proprietorship or partnership to a better legal structure such as Corporation or Limited Liability Company.

 

The first reason why you should incorporate is: Limited Liability of Owners
The first and the most important feature of a corporation is the limited liability of the shareholders in regards to claims against the company. A corporation is a legal entity separate from its shareholders.  The owner / shareholder of a corporation or LLC, is only liable for claims against the company up to the value of his/her equity in the Company and any creditors of the corporation or LLC cannot satisfy a judgment against the business with personal assets of shareholders, directors and officers. The only exceptions to that rule is when the company’s shareholders / directors or officers were found guilty in committing fraud and then they may be personally liability to damages resulting of that action.

 
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The Second reason why you should incorporate your business is: Tax Efficiency

Corporations & LLCs are eligible for tax deductions that other forms of business organizations can’t claim, including: medical expenses, entertainment expenses, car &  truck expenses, cost of business  travel, pension costs and other employee benefit plans. Corporations are taxed separately from their owners. The owners (shareholders) of a corporation are subject to lower tax rates when they receive dividend from the company and liable for the lower tax only upon distribution of the dividend.

  

The third reason for you to incorporate is: Business Credibility

Operating your business as a corporation or LLC gives you higher credibility. Adding Inc. or LLC to your business name sends a clear message to your customers, vendors and other parties you work with, that you are serious about your business and committed to its reputation.

 

The fourth reason for setting up a corporation is: Funding Opportunities

A corporation who wants to raise funds for its short or long term operation has the ability to issues shares in return for paid in capital paid by its shareholders. This mechanism gives a corporation access to funds that other form of business structure can’t really use. The other side of the same coin is the ability of the company’s shareholders to transfer / sell or assign their stocks of the corporation for profit. This feature may bring more investors to the company as shareholders, knowing that they can liquidate their investment at any given time.

 

Tags: Incorporate, Incorporation, Delaware company, Business Incorporation, Company Incorporation, US Incorporation for Non Residents, us LLC, LLC formation, LLC for non residents, Delaware LLC, USA LLC.

 

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