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Reasons for Incorporating Your Business

Authored by Peter Van Leunen

The best thing that incorporating your business acccomplishes is to protect your personal assets. Incorporating or forming a Limited Liability Company (LLC) allows you to conduct business without risking your home, automobile or any of your personal savings because of business liability. By incorporating or forming an LLC you are in essence creating a separate entity or “person” out of your company and shifting liabilty away from you and onto the company.

Sole proprietorships and general partnerships do not protect your personal assets from business debts or lawsuits against your business. Corporations and LLCs are considered to be separate from their owners and members.

Corporations are taxed at a lower rate than individuals. Business expenses like insurance, travel, entertainment, cost of equipment and supplies may be tax deductible.

Furthermore, if your business is incorprated or an LLC, then people are more likely to trust you, because you have to jump through the hoops that the secretary of state establishes for legitimate business entities.

Corporations are allowed to attract investors through sale of stock. Investors will feel much more comfortable if they’re protected from any liability by virtue of your corporate status.

Corporations are enduring business entities. They have a business life that extends beyond an owner, principal or partner. Incorporation avoids any legal entanglements or even termination of the business in the event of long-term disability or death.

Incorporation allows you to transfer ownership through a simple stock purchase agreement.

Corporate structures create an environment where there are more people working toward the betterment of a company, rather than investing complete power and control in one person. This benefits the company in that a board reviews the facts related to business decisions and makes those decisions in the best interest of shareholders or members, rather than the interests of the owner alone.