What are the benefits of incorporating?

Asked by: EMACAY  — 23 March, 2011

Which states are best for incorporation?

Answered by: admin  — 23 March, 2011

Dear Emacay,

The greatest benefit of incorporating your business, is the limited liability protection for your personal possessions that is provided by such entities as corporations or LLCs. When your business is done through a company with limited liability, you are not personally responsible for the debts and other liabilities of your business. In other words, should your business fail, get sued or in some other way become responsible for a repayment of a large sum of money, if the business has limited liability, those debts may drive the company to bankruptcy but they will not touch the owner’s personal possessions: house, car, savings, etc. That’s the single most valuable thing about incorporating. But of course, there are exceptions from this rule, that you need to be aware of.

Of course there are other benefits that bear mention. There are sometimes tax advantages in conduction business through a company, and that’s something you should certainly discuss with your accountant. There is the matter of reputation – customers sometimes feel more at ease dealing with a corporation than with an individual. And there is simply a benefit in having your business organized in a separate entity, apart from your personal affairs and accounts, and apart from the affairs of your other businesses.

The state in which it is best to incorporate generally depends both on the type of business you will engage in and on your goals with respect to your company.

For example, if you are opening a brick-and-mortar store it is generally most convenient to form your company in the state where the store is located, but if you are opening an online business, the world is your oyster, as they say. Similarly, if you are anticipating attracting venture capital to your company, then Delaware offers you the advantage of the friendliest and most developed business laws. If you would like to stay anonymous as the owner, New Mexico is the way to go. If you would like to take advantage of great liability protection and avoid high costs and a lot of hassle –Wyoming is a great state to start an LLC.

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