Reasons to Incorporate a Business

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Reasons to Incorporate a Business

Reasons to Incorporate a Business

Reasons to incorporate a business. A considerable number of entrepreneurs – even some of the savviest – barely understand the basics of setting up a corporation. Despite the lack of knowledge, incorporating a business is essential for a business to assure its stability in the long run. This article is written mentioning the options an entrepreneur can consider in incorporating a business.


Reasons to Incorporate a Business

Although there are various reasons to incorporate a business, the main purpose is to provide adequate protection to the business owner’s personal assets from creditors and potential judgments. But, in instances like purchasing a corporate vehicle for an employee under a finance facility, the bank will probably ask for a personal guarantee. Under such circumstance, that particular asset (the vehicle as per the example) may not protected by corporate rules no matter if the business is registered as a C-Corp, and S-Corp or an LLC.

Obtaining tax advantages is another reason to incorporate a business. In the long run, it is essential for every business to have a good tax attorney (or a certified public accountant) to deal with highly compels tax issues. These tax issues are easy to be dealt with and understood when they are incorporated. Regardless of your reasons to incorporate a business, you should always consult an attorney


Basics of Business Incorporation

Depending on various facts, entrepreneurs can go for incorporation option like C-Corp, S-Corp, LLC or Sole Proprietorship. Once a business is incorporated, it gets a distinctive identity which operates as an entirely different aspect from the shareholders or owners. It separates the assets and liabilities from the owners.

Ownership of incorporated businesses is readily transferable needing exceptionally less paperwork. Because of the distinctive legal existence, an incorporated business can obtain their own specific credit ratings regardless of the credit status of the owner(s). When it comes to taxation, much lower tax rates are applied to incorporated businesses compared to personal tax rates. In addition to that, such companies are capable of carrying forwarding any amount of losses towards the upcoming financial year.

The existence of the incorporated businesses is barely influenced by the death or incapacity of the owner or a partner. The business will function as usual with new members, and that is why incorporated businesses are considered to be very much stable. This stability helps the company to grab the attention of potential investors on a long-term basis.

The legal aspect of incorporation can slightly vary from state to state. So, it is important for business owners to have a proper understanding of these distinctive rules and regulations. This is when the attorneys can help you to overcome legal confusions.

Technically, the activities of an incorporated business are governed by a board of directors. They play a representative role for all the shareholders of a particular company. Such companies own property under its name, sign contracts, and function as a separate entity although it doesn’t have the right to vote as a citizen.

Different types of incorporations feature different characteristics. With the guidance of an expert attorney to the subject of company registration, you can decide the best matching solution for your business.

Remember no matter what your reasons to incorporate your business are, remember to consult an attorney before you make any final decisions.




Joe Flynn is a Silicon Valley Entrepreneur who created Lavante, Inc. Lavante was started with the vision using Machine Learning, Natural Language Processing and advanced Data Extraction techniques to transform the traditionally manual-based Account Payable Recovery industry. Lavante Was acquired by PRGX Inc. in November 2017. Joe is currently working on a new venture using Artificial Intelligence and Machine learning to transform trade partner communications across the entire supply chain.