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Tuesday May 17, 2005 7:24 am

Business Formation: Incorporation




Posted by Andru Edwards Categories: Legal, Planning

Why would you want to go through the hassle of incorporation when a sole proprietorship is so much simpler to form and manage? It is certainly a loftier task to incorporate, and there are plenty of additional laws and regulations set by the government that you would have to adhere to. Then there is the issue of having to pay both personal and corporate taxes. At first glance, it may not sound like the preferred method of doing things – until you consider some of the advantages:

Health insurance premiums can be considered a business expense, and thusly are a deduction.

The assets of the company are owned by the company rather than an individual. This provides substantial personal protection, as the business should only lose its assets in the event of bankruptcy. Your personal assets remain intact. This is especially relevant if you plan to offer services which may be susceptible to lawsuits.

Capital can be raised by selling shares of the company.

If you believe that incorporation is the way to go for your business then you have two options. You can form a C corporation, or a subchapter S corporation. Most small businesses which choose to incorporate will go with subchapter S route.

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