We set up scores of new businesses each year, most of which are incorporated. While there are sometimes good reasons not to incorporate, such as businesses whose primary purpose is ownership of real estate, here are seven reasons why setting your business up as a corporation could be a good idea:
- Liability for debts/claims is limited to the amount of your investment in most instances.
- Corporations survive after the death of a shareholder, unlike proprietorships and in some cases partnerships.
- Portions of the business are freely transferable in the form of shares of stock.
- Corporations are separate legal entities, creating possible business relationships and tax advantageous transactions between shareholders and the corporation (leases, contracts, etc.).
- Potential availability of favorable employee benefit plans.
- Privacy/anonymity of principals (shareholders).
- Centralized management in the board of directors.
In most cases, limited liability alone justifies establishing a new business in the corporate form. Continuity of existence and free transferability of interests enhance estate planning possibilities as well as the ability to sell the business down the road.
If you are thinking about starting a new business, setting it up as a corporation should be high on your list of considerations.
If you are thinking about starting a new business, setting it up as a corporation should be high on your list of considerations.
– Stu Cohen