Advantages and Disadvantages of Incorporating a Business

Advantages and Disadvantages of Incorporating a Business

When should you consider incorporating your business? This article will discuss the advantages and disadvantages of business incorporation. When most people start a business, it is usually a small business, and consists of a DBA or an Assumed Name. This businesses entity costs very little to start, but leaves the business owner open to legal issues since the business is nothing more than an extension of their personal name, credit, and tax information. As the business grows, many small business owners start to think about incorporating a business to get better protection.

What does it mean to incorporate a business?
Incorporation is basically setting the up the business as a separate legal entity. The corporation becomes it’s own living entity, and while you may be the sole owner or shareholder in the company, for the most part the corporation is a stand alone business. For example, if you have a credit line or loans that are only in the corporation name, you are usually not personally responsible if the corporation becomes unable to pay the bills.

There are disadvantages to incorporating a business. There are a lot more tax rules with corporation, and you may need a lawyer or similar service to help you complete the proper legal paperwork to get the corporation started. When considering the advantages and disadvantages of incorporating a business, it is always best to consult a legal attorney, as well as a tax professional to make the best decision for your business and situation.

Updated: December 15, 2011 — 7:26 pm

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