How to Determine if You Need to Incorporate
Decide whether it is time for you to incorporate.
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Instructions
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Consider the advantages that incorporating will offer you and other owners of the company.
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Know that corporations are legally separate from their owners. The shareholders in a corporation stand to lose their initial investment and no more. Owners of other types of companies can be held peronally liable.
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Consider another advantage of corporations: Creditors generally can't hold the owners personally liable for corporate debts.
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Decide whether it is crucial that the company live on after the owners die or retire. A corporation's ownership can be transferred. Many other types of businesses dissolve when owners leave.
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Know that the shareholders of a corporation don't bind the firm by their individual acts.
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Consider the importance of attracting capital. Corporations can more readily win investors than can other types of companies. Corporations can sell bonds and stock. They also can retain earnings of $100,000 to $250,000 and avoid paying taxes on that money.
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Weigh the merits of setting up medical-benefits programs for employees. Corporations can deduct health-related expenses without having to report those amounts as income.
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Keep in mind that corporations generally do more paperwork and pay more kinds of taxes than do other types of organizations.
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Tips & Warnings
Ask friends who have incorporated how they did it and whether it was worth the hassles and costs.
