The 10 Best Resources For Tips
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The Advantages of Forming a Corporation
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, the truth is that this business entity is not difficult to set up.
Comparing the benefit of a corporation to the perceived disadvantages, it is clear that the entity is beneficial in many ways. In many cases, the benefits of a corporation are not available to general partnerships and sole proprietorships. Here are some reasons why you should consider forming a corporation:
Protection of Your Personal Assets
The members that own a corporation are referred to as the owners. When you have a corporation, you will benefit from limited liability protection. Therefore, any debts that the business has are not tied to the owners. 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. In such a case, the personal property of the owners of the business can be attached to the company and auctioned to recover debts.
Another benefit of forming a corporation is to gain tax advantages. There are various tax deductible options shareholders of corporations have. For example, any payments made for expenses such as life insurance may be tax deductible. Self-employment taxes also attract various tax deductions.
To better understand all the tax benefits of opening a corporation, you should consult a qualified tax accountant.
When you open a new business, most potential customers will be wary of doing business with you if you have a sole proprietorship. 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. Most prospective customers will feel confident of doing business with you if you have a corporation rather than a sole proprietorship.
While shareholders own a corporation, its operations does not depend on them. A corporation has the ability to continue operations even when the shareholding positions change. For example, even when some shareholder pass on or decide that they no longer want to be part of the corporation, the business’ operations will still continue. On the flip side, a sole proprietorship will wind up operations when the owner passes on.
Transfer of Ownership if Easy
It is also easy to transfer ownership of a corporation. The company’s operation agreement outlines what should be done when there is need to transfer ownership. However, there are special restrictions for S corporations. Contact a business attorney to find out about the transfer options of a corporation.
The above are the main reasons why you should start a corporation.