Very few people question the phrase that says that hard work and a little bit of luck is what one needs to BE successful. However, the right type of knowledge and the right type of advice, especially when setting up a business, is what will help you STAY successful.
Owning a business can be risky and to minimize this, a lot of thought goes into planning a business. Business owners often get stuck on planning what the customer sees; i.e. location and shop design, the employees and management. Planning on a proper business structure often gets ignored by the entrepreneur. A business structure can be in the form of a sole proprietorship, partnership, closed corporation or limited liability company. Many business owners do not realize that the choice of business structure can be the difference between success and bankruptcy.
Today’s marketplace is highly competitive and litigious such that not having access to a business litigation specialist attorney, is very likely to leave you exposed to any number of lawsuits at any given time.. If one wants to succeed, as all entrepreneurs want, one needs to make the most of all available advantages. One of these is the corporate form of business.
Incorporating is not ideal for everybody, but it does have advantages where the other entity types don’t. Seven of these advantages are described below.
1. Asset protection: Operating in a sole proprietorship or partnership has a lot of personal liability involved in business debt or lawsuits. This extends even to one’s personal assets such as one’s home, vehicle, jewelry, etc. Generally speaking, this is not the case with a corporation. In a corporation, one is only responsible for one’s investment in the corporation. With its limited liability feature, although not a 100% guarantee, is by far one of the advantageous reasons for this business form.
2. It is easier to sell: This business type is usually more attractive to potential buyers when compared to sole proprietorship and partnerships and are generally easier to sell. This is due to the fact that the new buyer will not be personally responsible for the past owner’s wrongdoings. A new owner of a sole proprietorship or partnership can be held responsible and personally liable for the transgressions of the previous owner. Generally, this is not the case with a corporation.
3. Tax savings: There are numerous tax saving advantages in a corporation that are not easily accomplished with the other business types. In a corporation, a separate and distinct legal entity is created so that there is the owner and then there is the business. This allows one to structure transactions between the business and the owner in order to save on taxes. For example, if the owner of the corporation owns the building, the owner can rent (gain another income) to the corporation and then the corporation has a rental expense (decreases profit, pay less tax). This type of arrangement cannot be done with a sole proprietorship or partnership.
4. Privacy and confidentiality: If an entrepreneur wants to start a business and would also like to remain anonymous, the best way to accomplish this is with a corporation. A corporation allows one to keep their personal life and business affairs private and confidential.
5. Raising capital is easier: It is easier to raise capital, either through investments or lending, with a corporation. For investments, a corporation can simply sell a share of the stocks to the investor. With lending, a corporation adds clout to deals done with lending institutions such as banks.
6. Perpetuity: As mentioned in point number 3, a corporation is a separate and distinct legal entity. This means that if the owner(s) die, the business carries on irrespective. This is not the case in sole proprietorship and partnerships, in which the business automatically ends and/or is tangled in red tape.
7. Increased credibility: An “INC.” or “CORP.” at the end of one’s business’ name makes it look more professional and adds credibility when doing one’s business dealings. People are fickle and can feel securer or more confident when doing business with a corporation as compared to other business types.
However, one should always consult with one’s attorney or business advisor prior to one undertaking important legal or financial decision. The author is not responsible for your decisions and this article should not be used in isolation.
Other resources to help include:
As well as http://www.smallbusinessattorneynyc.com who can offer you the necessary legal advice you might need in setting up your legal business structure.