If you have recently started a business, you may be wondering if you should incorporate. It is a good time to incorporate if your business has obtained or developed value, is ready to enter contracts, or is looking for funding.
A corporation is a legal entity that is separate and apart from its owners (shareholders) and has the same rights and obligations as a natural person. In this post we will address various benefits to incorporating your business, including:
Incorporation provides a barrier between the owner’s personal assets and those of the business. The corporation is responsible for its obligations, debts, and actions. Should a corporation incur debts it cannot pay, creditors of the corporation can only obtain the personally held assets of the business owners in specific circumstances. Your personal assets are not normally at risk being held liable for unpaid debts or bankruptcy of an incorporated business.
There are many factors to consider when contemplating the tax effects of incorporating. If you are considering incorporating your business, you should meet with an accountant to discuss these considerations.
There are some benefits that may be applicable to your business:
An incorporation has structures, processes, practices that the business can use to manage its affairs. By planning the corporate structure of your business, you can dictate the rights, responsibilities, and involvement of stakeholders in the business. Key actors in the corporate structure include:
While many new businesses do not have the assets that would allow them to easily secure financing from traditional lenders, businesses that are incorporated will be more attractive to lenders and investors as they become profitable. Additionally, corporations may be able to access grants and government funding that are not available to unincorporated entities.
There are many benefits to incorporating but business owners must be aware of the obligations of incorporation. They include:
Before you incorporate your business, contact a corporate lawyer at Getz Collins and Associates. We can advise of relevant considerations and assist you in making this important decision.