There are many good reasons for forming a corporation, if you are minded to do so. People tend to believe that a Corporation and a Limited Liability Company are all but interchangeable, and in many ways they are not too far wide of the mark. However, there are differences between the two, and it is in these differences that people find their reason for choosing one or the other. There may be many individuals who are leaning one way or the other – so here are some reasons why you should choose to form a corporation.
1) The protection of personal assets is a major issue for individuals entering into a business partnership. If, in order to raise money for the purchase of goods or services in the pursuit of creating the company, an individual chooses to cash in an asset, that is their choice. To risk it being lost at some indeterminate future point, however, is not a risk many are willing to take. You may only lose in the proceedings of a business collapse what you have put into the business yourself. In the same way, it is possible to put a personal asset into the ownership of a company and protect it from being seized if you yourself are the subject of a lawsuit or bankruptcy proceedings.
2) Taxation bears a lighter weight on a corporation than it does on an individual. If your income and many of your assets come through your company, they can be protected from the higher levels of tax. It is certainly something that necessitates close watching, and is a tricky balancing act to pull off, but it certainly benefits an individual to have this kind of flexibility in fiscal terms.
3) The permanence of a corporation is something that it has over a limited liability company. A corporation can continue indefinitely, and its identity is not defined purely by its membership. Although many people point to the greater flexibility of an LLC as being the reason to choose that way of operating, there are many who prefer a corporation because of its greater constancy.
4) An incorporation will have its own eligibility for credit, regardless of and unaffected by its owner’s personal credit scores or that of its shareholders and directors. By using corporate credit in place of personal borrowing, it is possible to build a business credit rating which allows a far greater level of borrowing power and borrowing freedom. This can allow a company to make much bolder decisions and grow at a quicker rate.
5) Finally, there is a non-legal but equally persuasive reason for forming a corporation. The cachet connected with being able to add Corp. or Inc. after the name of your business really does cause your company to be taken more seriously. It may be a wholly cosmetic issue, but the mere fact of that shows that a lot of people will treat that as being the case – and for business purposes there is little difference between perception and reality.
Disclaimer: This article is for informational and entertainment purposes only, and should not be construed as legal advice on any subject matter.
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