ADVANTAGES OF INCORPORATING
Starting your business as a sole proprietorship or a partnership is fairly simple and affordable, but depending on the nature of your business, you may wish to consider the advantages of incorporation. There are two main advantages to incorporating your company:
- Limited Liability
- Tax Savings
While there are higher initial costs associated with incorporating, and more administration going forward, for many business models, the advantages of incorporation far outweigh these drawbacks – and are worth the extra time and expense.
In the eyes of the law, a corporation is viewed as a distinct legal entity – it is considered to be a separate “person” from a legal perspective. What this means is that the corporation’s shareholders are not responsible for any liability of the company (except in rare circumstances like breach of trust), and the only potential liability a corporate shareholder may face is limited to one’s initial investment, if any. The corporation owns the assets of the company, and is responsible for its liabilities – not the shareholders.
Thus, except in limited circumstances, the personal assets of any shareholder in a corporation are “shielded” from the risk of legal claims against the corporation.
Tax Advantages of Incorporation
One of the greatest benefits of incorporating a company is the flexibility to plan advantageous tax strategies that personally benefit the shareholders or officers of the company.
In a sole proprietorship or partnership arrangement, all profits are considered the personal income of the proprietor or partners. In a corporation, profits can be structured and distributed throughout the corporation and to shareholders by various means, allowing one to develop a proactive strategy for tax deferral, splitting, and minimization.
Incorporating your business can be quick, simple, and affordable. We would be pleased to discuss with you the various elements and tax advantages associated with incorporation, to determine whether incorporation is right for you. If you are considering incorporating your business, call us today for a no-obligation consultation.
Please feel free to contact us if you have any questions that aren’t answered on our site, or to schedule an appointment. We’re always happy to chat with you about any of your legal needs.
- Phone: (587) 272-2050
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