Many entrepreneurs often assume corporation filing is costly, time-consuming, and stressful. But the reverse is the case. The benefits of incorporating your business typically outweigh any perceived disadvantages, and these benefits are unavailable to sole proprietorships. Do you want to start a trucking business? or already operating as a sole proprietorship, but wondering if corporation filing is right for your business? Global Multi Services explains the benefits of forming a corporation. Let’s dive in.
WHAT IS CORPORATION FILING?
Corporation filing is a set of documents providing important information about the corporation. These include the name, address, shareholders information, business purpose of the corporation, and many more. Filing articles of incorporation is mandatory no matter the state it is incorporated.
BENEFITS OF CORPORATION FILING
GENERATES CAPITAL
Incorporated companies are allowed to source funds in the form of equity or debt. That means they can raise funds through the public or debt referring to bank loans or other forms of credit. Capital is raised in incorporated businesses easily through the sale of stock. They also attract many investors because of limited liability and the easy transferability of shares. These make them more reliable. Also, many banks prefer handling loans with incorporated borrowers.
ASSET PROTECTION
A corporation provides assets protection to
its owners than any other business entity. That means the shareholders are not
personally responsible for the debts or liabilities of the company even if the
corporation doesn't have enough money in assets for repayment. Asset protection
is one of the main reasons many businesses chose to file for incorporations.
TRANSFERABILITY OF OWNERSHIP
Corporation ownership depends on the
percentage of stock. This makes it flexible when compared to other business
entities. Transfer of ownership is easier in a corporation because a
shareholder may transfer his shares to anyone. Specific information about the
transfer often depends on the agreement in the bylaws and articles of
incorporation. For example, shareholders can sell their share if they want to
leave the company. Similarly, if shareholders die, their stock can be transfer
to their family or someone else.
TAX BENEFIT
Corporations often have tax advantages. These
include health insurance premiums, savings on self-employment taxes, life
insurance, and many more. Although C-corporations are subject to double
taxation, other tax benefits depend on how their income is shared.
CONTINUITY OF LIFE
Corporation’s existence does not depend on
its owners. That means there is no limit to the life of a corporation since its
ownership can pass through many generations of investors. If a shareholder dies
or sells its share, the corporation still legally exists and will continue to
do business as usual.
BUSINESS CREDIBILITY
The shareholder often appoints experts to
manage the day-to-day activities of the business. These improve accountability
and establish business credibility. The availability of resources also makes it
easy to offer good salary packages to employees, which attract the best talent
available in the market. Incorporating your business also establishes trust
with potential customers, employees, vendors, and partners.
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