What are the advantages of incorporating?
One of the primary advantages of incorporation is the limited liability the corporate entity affords its shareholders (owners). Because the corporation exists separately from its owners, creditors typically cannot seek to use the shareholders’ personal assets to satisfy the debts and liabilities of the corporation. Conversely, in sole proprietorships and partnerships, the business and owners are legally considered to be the same. Therefore the owners’ personal assets can be used to satisfy business debts and liabilities. In addition to limited liability, corporations offer these other advantages: Corporations possess the feature of unlimited life. If an owner dies or wishes to sell his or her interest, the corporation will continue to exist and do business.
A. The main advantage of forming a corporation is the limited liability the corporate entity affords its shareholders. Typically, shareholders are not personally liable for the debts and obligations of the corporation. This means that creditors cannot demand an individual shareholder to pay the debts of the corporation. In contrast, in a partnership or sole proprietorship the owner’s personal assets may be used to pay debts of the business. There are also other advantages of incorporating a business: A corporation’s life is not dependent upon the life of its members. A corporation possesses the feature of unlimited or perpetual life. For example, if a shareholder dies or wishes to sell his interest, the corporation will continue to exist and do business. Ownership of a corporation is easily transferable. Capital can be raised more easily than other entities through the sale of stock. A corporation possesses centralized management.
Incorporating a business or company has many advantages for the business owners. When a business turns into a corporation, it becomes a legal entity separate from the people who own it. It has the same legal rights as a person, but these are also separate from the owners. Incorporating a company gives a long lasting business basis. If there were only one owner of the company, the death of that owner would usually mean the end of the company. It could also mean legal battles with family members who could claim rights to the company. Incorporating the business means that it can continue regardless of the death of any shareholders, executive officers or managers. Also, the ownership of the business can be transferred by selling stocks in the corporation. Another advantage of incorporating a business is limited liability. With partnerships or sole ownership, the owners are held personally liable for any business debt they owe. The creditors can seize the owner’s goods, savings, personal ho
One of the primary advantages of incorporation is the limited liability the corporate entity affords its shareholders. Typically, shareholders and directors are not liable for the debts and obligations of the corporation; thus, creditors will not come knocking at the door of a shareholder or director to pay debts of the corporation. In a partnership or sole proprietorship the owner’s personal assets may be used to pay debts of the business. Maintaining the limited liability of a corporation requires that the shareholders and directors follow all the rules of governance, including holding annual meetings and maintaining meeting minutes, which is why we offer corporate forms disks and corporate kits as part of our complete incorporation package.
