The major reasons for incorporating your business are the following:
- Limited Liability- When a corporation enters into a transaction or becomes liable for other reasons, its individual owners do not suffer the liability also. Therefore, you can protect your personal assets for yourself and your family when establishing or running a corporation. This is a general rule and has its exceptions such as when there are personal guarantees or when the corporation is not run and managed as an entity separate from its owners.
- Ease of Ownership Division- By the issuance of shares, owners may easily divide up their respective interests. Further, upon the death or retirement of one or more of the owners, the corporation continues to exist as before
- Benefits to Owners- A corporation may offer benefits such as medical insurance and retirement benefits which are often more difficult when the business entity is a partnership or a sole proprietorship.
- Taxes- A corporation, being a separate entity, pays its own taxes. In many cases this is an advantage to taxation on an individual. There are means of passing through taxation on corporate profits to the individuals (Subchapter “S” corporations, for example), and those decisions must be made by each business owner.
There are many other reasons one may choose to incorporate, but the above is simply an overview of the major reasons for incorporation.