INCORPORATION : Benefits of a Corporation
The Legal Benefits of a Corporation in the United States of America
- Protection of personal assets. Safeguarding personal assets against the claims of creditors and lawsuits. Sole proprietors and general business partners in a partnership are personally and jointly responsible for all the liabilities of a business such as loans, accounts payable, and legal judgements. In a corporation, however, stockholders, directors and officers typically are not liable for their company's debts and obligations. They are limited in liability to the amount they have invested in the corporation (eg: If $100 in stock was purchased, no more than $100 can be lost). Corporations and Limited Liability Companies (LLCs) may hold personal assets like houses, cars or boats. If one is personally involved in a lawsuit or bankruptcy, these assets may be protected. A creditor of the owner of a corporation or LLC cannot seize the assets of the company; however, they can seize their ownership shares in the corporation, as that is considered a personal asset.
- Transferable ownership. Ownership in a corporation or LLC is easily transferable to others, either in whole or in part. Some states' laws are particularly attractive to this end. For example, with a Delaware Corporation, the transfer of ownership in a corporation is not required to be filed or recorded.
- Retirement funds. Retirement funds and qualified retirements plans, such as a 401(k), may be established more easily.
- Taxation. In the United States, corporations are taxed at a lower rate than individuals. Also, they can own shares in other corporations and receive corporate dividends 80% tax-free. There are no limits on the amount of losses a corporation may carry forward to subsequent tax years. A sole proprietorship, on the other hand, cannot claim a capital loss greater than $3,000 unless the owner has offsetting capital gains.
- Raising funds through sale of stock. Capital from investors can be raised for corporations easily through the sale of stock.
- Durability. A corporation is capable of continuing indefinitely. Its existence is not affected by the death of shareholders, directors, or officers of the corporation.
- Credit rating. Regardless of an owner's personal credit scores, corporations acquire their own credit rating, and build a separate credit history by applying for and using corporate credit.
The Legal Benefits of a Corporation in the United States of America ...
The process of Incorporation starts with the Articles of Incorporation (also called a Charter, Certificate of Incorporation or Letters Patent) ...
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