| In our capitalist world, businesses need to grow to | | | | obligations. If you were to invest $50 in a company, |
| succeed. It's one of the most basic principles of a | | | | you'd only be responsible for that $50. Even if the |
| free market economy. If you own a business, you | | | | company goes belly-up, you're only out your $50 |
| probably spend a lot of time thinking about how you | | | | investment. |
| can ensure your company's growth and viability. If | | | | - Separate legal entity. Corporations are considered |
| you do, chances are you've at least wondered about | | | | separate legal entities, distinct from the people who |
| turning your company into a corporation. This is called | | | | own them. They pay taxes separately, and they can |
| incorporation, and there are a number of benefits it | | | | sue or be sued in their own name. |
| can have on your company. | | | | - Transferable ownership. Unlike in privately owned |
| What Is Incorporation? | | | | businesses, corporations have easily transferable |
| Incorporation is the act of filing a company as a | | | | ownership. The ease with which ownership can be |
| corporation, which (depending on the state you're | | | | changed differs from state to state, with Delaware |
| incorporating in) involves various requirements. Some | | | | corporations being particularly easy to transfer, as |
| states have simpler incorporation laws than others, | | | | they don't need to be recorded or filed. |
| usually as a ploy to get more businesses in the state. | | | | - Tax Purposes. Under US tax law, corporations have |
| Corporations are different from partnerships and | | | | tax rates lower than individuals do. Because |
| privately owned companies, in a number of ways. | | | | corporations are separate legal entities, they can |
| Some of the biggest legal benefits include: | | | | invest in other companies, just like individuals can. |
| - Limited liability. As a business owner, you have a lot | | | | However, they receive their dividends 80% tax-free. |
| of yourself invested in your business, both | | | | - Selling stock. Corporations can raise funds by selling |
| emotionally and financially. You're responsible for all | | | | shares of stock in the company. However, it's worth |
| the debts your company takes on, and if it loses | | | | noting that this dilutes the ownership of the |
| money, you're responsible for that, too. In | | | | company. |
| corporations, however, investors, directors, and | | | | - Continuity. Unlike smaller companies, a corporation |
| board members are only responsible for their | | | | can survive regardless of the deaths of board |
| investments, not the company's overall debts and | | | | members or directors. |