The primary benefits of operating under a corporate form generally revolve
around tax and marketing considerations and ease of attracting investors. In
real life, while the benefits of incorporation may technically be available to a
business of any size, in practice very small businesses may gain little or no
benefit by incorporating until they have employees or can reap tax benefits by
incorporating.
That said, these are the potential benefits of the corporate form of business:
You may be able to raise capital more easily as a corporation than as a
sole proprietor; however, there are no guarantees.
It may be easier to transfer ownership in a corporation than it is in a
sole proprietorship or a partnership.
Under some circumstances your tax rate might be lower.
If you have employees, incorporation may protect your personal assets if
an employee does something that causes the company to be sued.
You may be able to give yourself more company-paid fringe benefits as an
employee of your corporation.
You may be able to get and keep good employees by offering them stock in
the company.
You may gain estate-planning benefits.
You might find incorporation preferable to a partnership if you will be
going into business with one or more other people.
Copyright 1993, 2000, 2004 by Janet Attard. All
rights reserved.
The preceding article is excerpted from
The Home Office
and Small Business Answer Book by Janet Attard. The book contains more than
800 answers to the most frequently asked questions about starting and running
small and home businesses. For information about licensing this and other small
business and startup content for your site, please send email to
sales@businessknowhow.com.
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