Small Business Incorporation – Is It for You?

When you start a small business, you need to know what kind of business organization you wish to have. What you decide on can confer some great advantages on your business, or take away what is your due. Let's look a little more deeply into the whole matter of small business incorporation in this country. About the most common kind of business organization in this country is the Corporation – it is a business that is incorporated under state law. It could be a nonprofit corporation, a professional corporate, a close cooperation or one of another kind. With small business owners, the close corporation is usually the most popular kind to pick. As you can probably guess, in a close corporation, the sharers are not publicly traded – they are held by a specified number of individuals who are close to the business.

So why should business incorporation be something a small business needs? The most important advantage that incorporation partnerships is that a business becomes separate from its business founder. It gains its own individual identity under the law. This means that it gets to act like a person – own property, sue and be sued and so on. It also means that whatever losses occur, the small businessman does not need to be liable for anything beyond the value of the shares in the business he holds. If there were no business incorporation done, the business owner would own the business as personal property; if any losses came about that exceeded the value of the business, people who sued could have the owner's house and property to pay for the debt. This just could not happen with a small business that was incorporated.

One of the best advantages you get with business incorporation is, that ownership of the business can get transferred as easily as a transfer of shares can be done. With a small business of any other kind, transfer of ownership would be pretty long-winded and difficult. With incorporation, whoever holds the shares, gets ownership in the company. An incorporated business gets run with professionalism that is not usually seen in a sole proprietorship. Anyone who owns a proprietorship gets to call the shots. That's not how it's done in an incorporated business. It does not matter who owns the business – the board of directors has to approve every decision. It enforces professionalism. There's just one drawback that goes with business incorporation though – it's called double taxation. The business, since it's an individual, is taxed with business taxation. And when dividends get distributed to you as a shareholder, you are taxed on a personal level. But apart from that, incorporating your business can be great going.

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Source by Eli Rutledge


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