If you are ready to start your business, you may be wondering whether or not to form a corporation. Most people avoid forming a corporation because they think it is too expensive or time-consuming. However, neither of these is the case.
The benefits of a corporation far outweigh the perceived cons. Most of the benefits that a corporation is entitled to cannot be enjoyed by owners running sole proprietorships or partnerships. Here are some reasons why you should consider forming a corporation:
Protection of Your Personal Assets
“Shareholders” refers to the members that own a corporation. When you have a corporation, you will benefit from limited liability protection. This means that the shareholders of the corporation are not responsible for liabilities or debts of the business. Therefore, in case of judgments, creditors cannot seize the shareholders’ personal assets such as cars, houses, and others to pay the business debts.
On the other hand, in a general partnership or a sole proprietorship, the owners of the business are considered to be part of it. With these businesses, the owners’ personal property can be seized in case of debts.
There are various tax benefits you can take advantage of when you have a corporation. The owners of a corporation are entitled to a number of tax cuts. For example, shareholders are allowed to claim tax deductions for expenses such as life insurance. Owners also benefit from savings on self-employment taxes.
Consult a tax consultant to help you understand all the tax benefits of operating a corporation.
Many company prefer doing business with other companies rather than sole proprietorships. Most people do not consider sole proprietorships to be serious businesses. When it comes to doing business, prospective clients would want to know that they are working with a legal, established company. Having a corporation is one of the ways you can make customers feel at ease with doing business with your company.
While shareholders own a corporation, its operations does not depend on them. One of the features of a corporation is that it has unlimited life. What this means is that if an owner wishes to withdraw from the corporation or passes on, the corporation will continue to exist. This is unlike the case with a sole proprietorship where the withdrawal of a partner means closing of the business.
Easy Transfer of Ownership
Transferring ownership of a corporation is also possible. The structures and operations agreement indicate the steps to be followed to transfer ownership of a corporation. However, S corporations have special transfer rules. Contact a business attorney to find out about the transfer options of a corporation.
The above are some reasons why you should consider forming a corporation.