Incorporation 

The term “incorporating” is defined as the act of creating a new corporation under the laws of a particular state. The term can also refer to the formation of a Limited Liability Company (LLC). The act of incorporating, no matter which version you choose, allows you to protect your personal assets–the biggest reason that business owners incorporate.

Advantages of Incorporating
Whether you’ve got two people on your team or ten, all businesses can benefit from incorporating. Advantages of forming a corporation or Limited Liability Company (LLC) include:

  • Personal asset protection. Both corporations and LLCs allow owners to separate and protect their personal assets. In a properly structured and managed company, owners should have limited liability for business debts and obligations.
  • Additional credibility. Adding “Inc.” or “LLC” after your business name can add instant authority. Consumers, vendors, and partners may prefer to do business with an incorporated company.
  • Nationwide availability. All 50 states and the District of Columbia now recognize both corporations and LLCs.
  • Name protection. In most states, other businesses may not file your exact corporate or LLC name in the same state.
  • Perpetual existence. Corporations and LLCs exist perpetually, even if their ownership or management changes. Sole proprietorships and partnerships end if an owner dies or leaves the business.
  • Tax flexibility. Though profit and loss typically pass through an LLC and get reported on the personal income tax returns of owners, an LLC can also elect to be taxed as a corporation. Likewise, a corporation can avoid double taxation of corporate profits and dividends by electing Subchapter S tax status.
  • Deductible expenses. Both corporations and LLCs may deduct normal business expenses, like salaries, before they allocate income to owners.

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