What Are the Advantages of Forming a Corporation?
Forming a corporation allows you to establish your business as a separate legal entity. The costs of forming a corporation differ from state to state.
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Liability
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Shareholders of a corporation have personal asset protection. Creditors and lenders are limited to corporation assets when trying to recover debts.
Transferring Ownership
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Transferring ownership is a simple process in a corporation. Publicly held corporation stock can be sold in minutes. Privately held corporation ownership is transferred with a deed of assignment specifying the number of shares being assigned.
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Lifespan
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A corporation has unlimited life--it can exist much longer than the original owners and subsequent shareholders.
Raising Capital
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Corporations can raise capital with the issuance of more stock. If you form a C corporation, you'll be able to raise additional capital by issuing different classes of stock. Banks and other lenders are more likely to lend to a corporation than to other types of business entities.
Tax Deductions
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Corporations are eligible for certain tax deductions, including deductions for contributions to employer-provided health plans. Social Security, Medicare, and workers' compensation aren't deducted from corporate funds. In addition, shareholders of a corporation avoid self-employment tax.
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