Advantages of Using a Corporation as a Business Entity

Why Incorporate?

If you own a business in today’s modern society, chances are you have probably thought about the different types of business entities that exist, and the possibility of choosing one that best fits the needs and dynamics of your business specifically. The corporate business form provides a multitude of benefits many are unaware of and generally is one of the most popular business entities. Below are a couple of the benefits that come along with the incorporation of a business.

Personal Asset Protection

The corporation is viewed as a separate legal entity, meaning that the corporation itself is an artificial creation that can carry on many of the same activities individuals can. A corporation can own property, incur liabilities and debts, and sue or be sued. Since a corporation is a separate legal entity, the debts incurred on behalf of a corporation mean that creditors, if need be, have the ability to seek payment only from the assets belonging to the corporation. This means that personal assets of shareholders, directors, and officers are off limits. Your personal car, home, and savings are all completely shielded.

Ability To Raise Capital

A corporation has the ability to issue shares of stock, regardless of whether the corporation is publicly traded or whether the corporation is closely. A publicly traded company can issue shares that can trade on an open stock market whereas a closely held company does not have a publicly traded stock market for its shares. The ability to issue stock can greatly impact the rate of growth and ability to raise money for a corporation.

Transfer Of Interest

Shareholders of a corporation have the ability to freely transfer a corporation’s stock. Although generally the default rule, smaller closely held corporations such as family owned and operated corporations not traded on a stock exchange, may set restrictions on the transferability of their corporation’s stock.

Business Credibility

Customers, suppliers, and competitors generally view an incorporated business with more credibility and respect. Having the word “inc.” or “Corp” distinguishes your business from unincorporated businesses and allows the corporation to create an identity for itself.

The process of incorporating your business can be challenging and complicated, and this list by no means exhausts the range of possibilities available during the incorporation process. If you have any questions about the incorporation process, please feel free to contact Aziz Legal by phone or email at (408) 203-4627 or abid@azizlegal.com.

This article is merely informational and is not intended to be used as legal advice. Use of any information from this article is for general information only and does not represent personal legal or tax advice, either express or implied. Readers are encouraged to consult Aziz Legal, or another attorney, for any specific legal matters.