Personal Liability (search)
Incorporating helps separate your personal identity from that of your business. In a Corporation you
are a shareholder and employee of the corporation, no longer the owner. Sole proprietors and partners
are subject to unlimited personal liability for business debt or law suits against their company.
Creditors of the business can hold the owners of the business personally liable for debt and can
move to seize the proprietor's or partner's home, savings or other personal assets. The shareholder
of a corporation has only the money he has placed into the company to lose, and usually no more.
Enduring Structure
A corporation is the most enduring legal business structure. Corporations may continue on regardless of
what happens to its individual directors, officers, managers or shareholders. If a sole proprietor
or partner dies, the business may automatically end or it may become involved in various legal
entanglements. Corporations can have unlimited life.
Transfer of Ownership
Ownership of a corporation may be transferred, without substantially disrupting operations, through the sale of stock.
Access to Capital Funding
Capital can be more easily raised with a corporation through the sale of stock or other equity instruments. With sole proprietorships and partnerships, investors are much harder to attract because of the personal liability. Investors are more likely to purchase shares in a corporation where there usually is a separation between personal and business assets.
S Corporation Tax Advantages
Corporations offer the advantage of allowing tax-deductible benefits such as health and life insurance and travel and entertainment deductions, as well as providing an increased tax shelter for retirement plans.
Anonymity
Corporations may offer anonymity to its owners. For example, if a businessperson wishes to open an independent small business of any kind, and does not desire his/her involvement to be public knowledge, the best choice is to incorporate. If opened as a sole proprietorship, he/she will clearly be identified as the owner.
Centralized Management
A corporation's shareholders cannot commit the company by their acts simply because they have invested in it. With partnerships, each individual general partner may bind the business to arrangements that may result in serious financial difficulty.
