There are many good reasons to form a corporation, if you wish. People tend to believe that a corporation and a limited liability company are practically interchangeable and, in many ways, they don’t deviate too much from the brand. 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 a lot of people who lean one way or the other, so here are a few reasons why you should choose to form a corporation.
1) Protection of personal assets is an important issue for people starting a business partnership. If, in order to raise money for the purchase of goods or services in order to create the business, an individual chooses to collect an asset, that is their choice. However, risking its loss at some indeterminate future time is not a risk that many are willing to take. You can only lose in the proceedings of a business collapse what you have invested in the business yourself. In the same way, it is possible to put personal property in the property of a company and protect it from seizure if you are the subject of a lawsuit or bankruptcy yourself.
2) Taxes carry less weight in a corporation than in an individual. If your income and many of your assets come from your business, you can protect yourself from higher levels of taxes. It’s certainly something that requires close monitoring and is a tricky balancing act to perform, but it certainly benefits a person to have this kind of flexibility in tax terms.
3) The permanence of a corporation is something you have about a limited liability company. A corporation can continue indefinitely and its identity is not defined solely by its membership. Although many people point to the greater flexibility of an LLC as a reason for choosing that way of operating, there are many who prefer a corporation because of its greater consistency.
4) An incorporation will have its own credit eligibility regardless of and will not be affected by the personal credit ratings of its owner or shareholders and directors. By using corporate credit instead of personal loans, it is possible to build a business credit rating that allows for a much higher level of borrowing power and freedom from borrowing. This can allow a business to make much bolder decisions and grow at a faster rate.
5) Finally, there is a non-legal but equally persuasive reason to form a corporation. The prestige associated with the ability to add Corp. or Inc. after your business name really makes your business take more seriously. It may be a totally cosmetic matter, but the mere fact of that shows that many people will treat it as if it were 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.