What are the Advantages of incorporation?
One of the primary advantages of incorporation is the limited liability the corporate entity affords its shareholders. Typically, shareholders and directors are not liable for the debts and obligations of the corporation; thus, creditors will not come knocking at the door of a shareholder or director to pay debts of the corporation. In a partnership or sole proprietorship the owner’s personal assets may be used to pay debts of the business. Maintaining the limited liability of a corporation requires that the shareholders and directors follow all the rules of governance, including holding annual meetings and maintaining meeting minutes, which is why we offer corporate forms disks and corporate kits as part of our complete incorporation package. Other advantages: • A corporation’s life is not dependent upon its members. A corporation possesses the feature of unlimited life. If an owner dies or wishes to sell his or her interest, the corporation will continue to exist and do business. • R
• Limited liability: potential loss limited to amount invested in the corporation. • Perpetual existence: corporation continues on after the death of the individual. • Tax advantages: accountants will generally recommend incorporation once revenues reach a certain point. • Raising capital: corporate form of business organization easier to raise capital through the sale of shares.
The most important advantage of incorporation is that it gives its stockholders limited liability. Since the corporation is a separate legal entity, its stockholders are protected from the debts and liabilities of the corporation. Other advantages: • A corporation has unlimited life. If an owner dies or sells his interest the corporation will continue to exist and do business. • Ability to easily establish insurance and retirement plans. • Ownership of corporation is easily sold or transferred through sale or transfer of stock. • Capital can be raised through sale of stock. • A corporation has centralized management which may remain in place after sale of business. [top] [Order Form] 4. What are the Disadvantages of incorporation? The primary disadvantage to incorporation is the possibility of double taxation. The profits of a corporation are taxed first as income to the corporation, then second as income to the shareholder. However, all reasonable business expenses such as salaries an
