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5 Reasons Why You Should Form a Corporation

If you are ready to start your business, you may be wondering whether or not to form a corporation. Many people incorrectly assume that forming a corporation takes a lot of time and is too expensive. However, the truth is that this business entity is not difficult to set up.

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. Some of the benefits of incorporation include:

Limited Liability Protection
The owners of a corporation are known as shareholders. When you have a corporation, you will benefit from limited liability protection. Therefore, in case the business has any debts or liabilities, the owners will not be held liable for them. Should the business be sued, the creditors cannot go after the personal property of the shareholders.

On the other hand, partnerships and sole proprietorships do not offer limited liability protection. In such a case, the personal property of the owners of the business can be attached to the company and auctioned to recover debts.

Take Advantage of Tax Cuts
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. There are also tax deductions on self-employment taxes.

Consult a tax consultant to help you understand all the tax benefits of operating a corporation.

Make Your Business More Credible
Many company prefer doing business with other companies rather than sole proprietorships. Majority of clients will not take you seriously if you are running a sole proprietorship. Customers want to feel that they are working with a credible business. Most prospective customers will feel confident of doing business with you if you have a corporation rather than a sole proprietorship.

Continuity Structure
A corporate may be managed by stakeholders, but does not depend on their owners. One of the features of a corporation is that it has unlimited life. 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, with a sole proprietorship, the business will come to a close when the owner withdraws their interest.

Transfer of Ownership if Easy
Transferring a corporation is easy. The structures and operations agreement indicate the steps to be followed to transfer ownership of a corporation. However, S corporations have special transfer rules. Your attorney can help you understand the transfer options available for the type of corporation you would like.

The above are five benefits of forming a corporation.

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