Tuesday, July 27, 2010

Advantages of Incorporating?

Reduces Personal Liability: In most cases owners are not personally liable for the company's losses or debts. Their investments in the registered company are their only financial risk Incorporating helps separate an individual's identity from that of his or her business. Insurance may still be necessary, but incorporation contributes an added layer of protection.

Tax Savings: There are a number of tax benefits for doing business under incorporation. Depending on your business income, incorporating a Corporation could lower your tax rate. Careful planning of entity type can result in lower overall tax rates. Even if your small business is quite profitable, a corporation is entitled to so many deductions. For example, as the owner of a corporation, your salary and those of your employees are tax-deductible for the business.

Reduces Likelihood of an IRS Examination: IRS Form 1040 and Schedule C (Profit or Loss from a Business), particularly of higher gross income levels, is the target of many IRS Audits. Incorporated businesses have a much lower audit rate, even if they have high income levels.

Anonymity: A Corporation can be established in such a way that shareholders/owners remain anonymous. Often this same anonymity can be accomplished for officers and directors.

Adds Credibility: A corporate structure communicates permanence and credibility. Even a company with only one stockholder and employee may incorporate.

Easier Access to Capital Funding : With a corporation, investors are easier to attract through the sale of stock.

Easier Transfer of Ownership: Through the sale of stock, ownership of a corporation may be transferred without substantially disrupting operations. The need for complex legal documentation is also reduced.

Shareholders: Your registered company will include shareholders, and you can take the company public. You can also issue stock or stock options to employees. The shareholders have ownership in the incorporated company, the Board of Directors governs the business, and elected officers manage the day-to-day activities. Registered company must adhere to corporate tax laws and file corporate taxes regularly.

Longevity: The board carries on the corporation, not the owner. That means that a corporation formation can last longer than an owner-based company such as an LLC.

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