Small Business
7 Advantages to Incorporating
By Alex Goumakos

There's no question that hard work and a little luck is what it
takes to BE successful. But a little knowledge, especially when
it comes to setting up your business, will help you STAY
successful.


While many business owners give a lot of thought to location,
store décor, customer service, hiring employees and management
issues (and rightly so); choosing the proper business structure
(such as sole proprietor, partnership, corporation, limited
liability company) doesn't get the attention it deserves.

Many entrepreneurs don't realize this, but the business form
they choose can often times be the difference between success
and failure, especially in today's competitive and litigious
marketplace. If you want to succeed, you need all the
advantages you can get. High on the list of safe bets is the
corporate form of business.

Incorporating, while definitely not for everybody, offers
several distinct and money-saving advantages over the other
types of entities. Here are seven of those advantages:

Asset Protection - If you operate as a sole proprietor or
partnership, there is virtually unlimited personal liability for
business debts or lawsuits. In other words should you go out of
business or be a defendant in a lawsuit, your personal assets
such as homes, jewelry, vehicles, savings, etc. are up for
grabs. This is generally NOT the case when you incorporate.
When you incorporate you are only responsible for your
investment in the corporation. The limited liability feature of
a corporation, while not a guarantee, is DEFINITELY one of the
most attractive reasons for incorporating.

Easier To Sell - Corporations are generally much easier to sell
and are usually more attractive to buyers than either a sole
proprietorship or partnership. The reason for this is because a
new buyer will not be personally liable for any wrongdoings on
the part of the previous owners. If someone buys a sole
proprietorship, for example, the new owner can be held
personally liable for any mistakes or illegalities on the part
of the prior owner…even if the new owner had NOTHING to do with
the situation! This is usually NOT the case with a corporation.

Tax Savings - When you incorporate there are numerous tax
advantages at your disposal that are virtually impossible to
accomplish with other business entities. When you incorporate
you create a separate and distinct legal entity. Because of
this, there are many transactions that you can structure between
you and your corporation to save big money on taxes. For
instance, if you own a building you can rent office facilities
to your corporation and claim depreciation and other deductions
for it. Your corporation can then claim the rental expense. You
are prohibited from doing this if you are a sole proprietor or a
partner in a partnership.

Privacy and Confidentiality - The corporate form of business is
a great way to keep your identity and business affairs private
and confidential. If you want to start a business, but would
like to remain anonymous, a corporation is the best way to
accomplish this. States such as Nevada offer even more privacy
protection for corporations and their shareholders.

Easier to Raise Capital - When you're looking to raise money
through investment or borrowing, a corporation can actually make
finding and getting the money you need easier. If you want to
take on investors you simply sell shares of stock. If you want
to borrow, a corporation can add clout when dealing with banks
or other lending institutions.

Perpetuity - As I mentioned in #3, when you incorporate you
create a separate and distinct legal entity. This separate and
distinct entity (the corporation) can endure almost forever
irrespective of what happens to the shareholders, directors, or
officers. This is NOT the case with sole proprietorships,
partnerships or even limited liability companies. For example,
if an owner, partner, or member dies the business AUTOMATICALLY
ends or gets wrapped up in legal red tape. Corporations, on the
other hand, have unlimited life.

Increases Credibility - Let's face it. Most people feel more
secure and confident dealing with a corporation as opposed to a
sole proprietorship. Having INC. or CORP. after your company's
name adds a touch of professionalism and credibility to your
business dealings.

As always, be sure to consult with your attorney or business
advisor before undertaking any important legal or financial
decision. While there are many advantages and money-saving
reasons to incorporate, as I've said before, it's not for
everybody. However, you do owe it to yourself to find out more.


Alex Goumakos is a CPA, business advisor and guest consultant of
Active Filings LLC, a professional incorporating company that
provides services in all US. (http://www.activefilings.com/).