5 Great Reasons to Form a Corporation

There are many good reasons to form a corporation, if you intend to. People tend to believe that a Corporation and a Limited Liability Company are almost interchangeable, and in many ways they aren’t too far off the mark. 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 can be many people who lean one way or the other, so here are some 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 pursuit of business creation, an individual chooses to collect an asset, that is their choice. However, risking losing it at some indeterminate future time is not a risk many are willing to take. You can only lose in business collapse proceedings what you yourself have put into the business. In the same way, it is possible to put personal property in the ownership of a company and protect it from being repossessed if you yourself are the subject of a lawsuit or bankruptcy proceeding.

2) Taxes weigh less on a corporation than on an individual. If your income and many of your assets come from your business, they may be protected from higher levels of tax. It’s certainly something that requires close monitoring and is a difficult balancing act to pull off, but it certainly benefits a person to have this kind of flexibility in tax terms.

3) The permanence of a corporation is something that it has over 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 the reason for choosing that way of operating, there are many who prefer a corporation for its greater consistency.

4) An incorporation will have its own credit eligibility, regardless of, and not affected by, the personal credit ratings of its owner or its 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 debt freedom. This can allow a company to make much bolder decisions and grow at a faster rate.

5) Finally, there is a non-legal but equally compelling reason to form a corporation. The stamp associated with being able to add Corp. or Inc. after your business name really makes your company more serious. It may be a purely cosmetic issue, but the mere fact of it 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.