Why Incorporation Is Necessary

The most important reason to incorporate your business is to protect yourself from business liabilities.

Shield yourself from liability  Establish perpetual existence and transfer of ownership  Gain tax advantages  Enhance the company's image  Improve ability to manage  Incorporate online because it's easy

Incorporating is essential to the success of any business. The process of incorporating entails the preparation of certain documents, including a document referred to as the “Articles of Incorporation,” and filing the documents with the Secretary of State. (For an LLC, the main document used to incorporate is referred to as the “Articles of Organization.”)

Below is an explanation of why it is necessary for every business to incorporate. The primary advantages of incorporation are discussed, as are the risks involved in operating an unincorporated business.

Shield yourself from liability

The most important reason to incorporate your business is to protect yourself from business liabilities. If you are operating an unincorporated business, its creditors may be able to reach your personal assets. Assets such as your personal residence and personal bank account can be used to pay business debts or to satisfy a lawsuit against your business. If you incorporate, business creditors cannot reach your personal assets, as an incorporated business and its owners are separate entities.

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Gain tax advantages

If you incorporate your business, there are tax deductions for a wide variety of operating costs which will substantially cut back your company’s overall tax liability. These deductions may include the cost of materials/production, employee wages, the cost of insurance, the cost of retirement plans, as well as business travel and entertainment expenses.

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Enhance the company's image

Another essential reason to incorporate your business is that it adds credibility to its operation. The perception of a business is improved by its incorporation and use of “Inc.,” “Co.,” or “LLC” following the name of the business. Customers are more likely to trust and deal with a business that has this positive image. More importantly, the business will be more attractive to banks and investors if and when the business seeks outside financing.

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Improve ability to manage

The decision-making authority of an incorporated business is centralized, which usually means that the shareholders have vested the authority in a Board of Directors. The Board of Directors can delegate this authority to the company’s officers. In an unincorporated business, the power structure and decision-making authority may not be defined and may be subject to manipulation by a co-owner or employee. This lack of structure will substantially affect the ability of the business to operate. Subtract this risk from your business by incorporating and thereby centralizing its management structure.

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Incorporate online because it’s easy

Incorporating online will take you about ten minutes and will cost you a fraction of what it would cost if you used a lawyer. We will walk you through the process, and enable you to effectively incorporate your business based on your business’s specific needs.  

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