Benefits of incorporation
When considering to incorporate your business, before jumping into the process, you need to understand the benefits, as well as the share of drawbacks it may have so that you know whether your business has reached a state where it can really carry the weight of the drawbacks but also enjoy the privileges of incorporation.
A few of the drawbacks can be additional taxes, more record keeping requirements and organizational details, they require owners and directors to gather every now and then to observe certain formalities. Corporations are also more expensive than partnerships and sole proprietorships to set up. In the early stages of a company these drawbacks may be the last thing an owner wants.
Despite the drawbacks there are certain advantages in forming a corporation. Here are the main reasons why some would incorporate their business.
The shareholder is not liable for actions of the corporation
Owners are not held responsible for company obligations and debts.
As opposed to proprietorships and partnerships, the life span of an corporation does not depend on the life of an individual. It has an indefinite life span unless stated otherwise.
Transferability of shares
With corporations, the privileges and rights of every individual owner depend on the amount of shares they own. These shares can be bought, sold or transfer.
Ability to raise investment capital
The limited liability and the ease of transferring shares make corporations very appealing to investors.