| Many business owners wonder why they should | | | | (subject to provisions in organizing documents). |
| bother incorporating their business. They believe that it | | | | Tax Benefits |
| is just a waste of money and time and/or their | | | | Generally speaking, a business will receive the most |
| business has been running smoothly despite not being | | | | tax benefits by incorporating into a LLC (limited liability |
| incorporated. What business owners need to know is | | | | company) or an S-corporation. This is so because the |
| that incorporating their business has many perks and is | | | | IRS allows these business formations to have the perk |
| an investment in their business that could, among other | | | | of limited liability AND pass-through taxation. |
| things, protect them and their families down the road. | | | | Pass-through taxation simply means that the owners |
| Here are some benefits of incorporating: | | | | of the business report gains/losses on their personal |
| Limited Liability Protection | | | | income tax forms. In contrast, income of a |
| By incorporating your business you are creating a | | | | C-corporation is taxed twice: once at the corporate |
| barrier between your personal assets and any liabilities | | | | level and once again when distributions are made to |
| of the business. Generally speaking, incorporation | | | | shareholders. Therefore, for many businesses, a LLC |
| allows you to only risk the investment you have | | | | or S-corporate form give them the best of both |
| already put into the business. If a creditor requires | | | | worlds: pass-through taxation and limited liability. |
| more than the business has in assets, they cannot go | | | | Credibility |
| past the business and go after your personal property | | | | The fact that a business is incorporated, a fact that is |
| assets. | | | | made known to customers by the indicating LLC or Inc. |
| Centralized Management | | | | following a business name, can greatly improve the |
| Under Minnesota statute, the default rules state that | | | | credibility of that business in the eye of the consumer. |
| the management of a corporation be conducted by a | | | | The fact that a business is organized under law can |
| board of directors. In essence, this means that there is | | | | create a greater sense of trust in the consumer. It can |
| a central meeting place where management decisions | | | | also indicate that the owners take their business |
| regarding the company are made in an organized | | | | seriously. |
| fashion. | | | | There are many perks to incorporating your business |
| Continuity of the Life of the Business/Transferability of | | | | but, in order to truly understand the intricacies of how |
| Ownership | | | | incorporating will effect your own business, you need |
| A corporation or LLC can continue its existence | | | | to talk to a lawyer. Each business is different and a |
| indefinitely due to the fact that an interest in a | | | | lawyer will be able to assist you in your business |
| corporation/LLC is considered personal property and | | | | planning needs so that you can take full advantage of |
| can be transferred independent of the business | | | | the benefits of incorporating. |