Why Incorporate?

There are many reason to incorporate, which we will out line below, but the main reasons to incorporate are to reduce personal liability, create tax advantages, raise capital and add credibility.

Reduce Personal Liability - When you incorporate, you are creating a legal entity that is separate from the ones who own it. This means that when the corporation is sued, there are provision in the law that protect the owners and the managers from personal liability. As a separate legal entity, a corporation is responsible for its own debts. Shareholders, directors and officers are normally not responsible for corporate liabilities.

Create Tax Advantages - Forming a corporation allows you to take deductions for yourself and your employees. This includes everything from heath care expenses to travel expenses. In addition, depending on where you live, work and the nature of the business, you could save on state income taxes by incorporating in a state with no state tax, like Nevada or Delaware.

Raising Capital - You will have access to more capital, if you form a corporation. Many investors, including most venture capital firms, will require that you incorporate before they invest money. When you incorporate, there is a legal structure of stocks, directors and officers which makes it easier for investors to oversee their investment.

Add Credibility - A corporation has greater credibility in the eyes of customers than does a sole proprietorship. When you incorporate it is perceived that you have long term plans for the business. Incorporating can also help when talking to banks about loans for your business.

Perpetual Duration - Since a corporation is a legal entity on its own, it will survive the death of the shareholders. The shares can be passed on to someone else, but the business operates as usual. A sole proprietorship will end with the death of the owner.