Incorporation

From Wikinfo

Incorporation describes the forming of a new corporation.

In the US, several legal benefits encourage incorporation:

Protection of Personal Assets

Safeguarding personal assets against the claims of creditors and lawsuits. Sole proprietors and general partners in a partnerships are personally responsible for all the liabilities of a business such as loans, accounts payable, and potential lawsuits. In a corporation, however, stockholders, directors and officers typically are not liable for the company's debts and obligations. Corporations or LLCs may also hold personal assets like houses, cars or boats. If one is not personally involved in a lawsuit or bankruptcy, these assets will be protected. A creditor of the owner of a corporation or LLC cannot seize the assets of the company.

Transferable Ownership

Ownership in a corporation or LLC is easily transferable to others. In Delaware, the transfer of ownership in a corporation in not required to be filed or recorded anywhere. See also: Delaware corporation

Retirement Funds

Retirement funds and qualified retirement plans (like 401k) may be set up more easily with a corporation. Your corporation can also fully deduct the cost of paying its owner's health insurance.

Taxation

Corporations are taxed at a lower rate than individuals. Also, they can own shares in another corporation and receive corporate dividends 80% tax-free. There are no limits on the amount of losses a corporation may carry forward to subsequent tax years. A sole proprietorship, on the other hand, cannot claim a capital loss greater than $3,000 unless the owner has offsetting capital gains.

Self-leasing

Some individuals find leasing personally owned property (real estate, automobiles, or even domain names) to an established corporation provides tax savings.

Raising Funds Through Sale of Stock

Capital from investors can be raised for corporations easily through the sale of stock.

Durability

A corporation is capable of continuing indefinitely. Its existence is not affected by the death of shareholders, directors, or officers of the corporation.