Think about sending tax returns to the Internal Revenue Service on March 17 next year. While April 15 is the individual tax return deadline, corporations file their returns nearly a month earlier, so if you incorporate you will have an extra day to mark on your calendar.
At US News, writer Matthew Bandyk thinks more small business entrepreneurs should set their sights on incorporating. He cited a recent book by Case Western Reserve University economics professor Scott Shane for reasons why:
The biggest positive effect of incorporation is on legal liability. If you get sued as a sole proprietor, your personal assets are on the line. But a corporation is liable only for the assets put into the corporation. This protection can be a boon for a business's growth. "In some cases it's harder to grow large because the risk to you is too great," Shane says.
Online options for incorporating exist, at a lower cost than what a small business may find through its local lawyer. In a society where litigation seems to happen as a reflexive response to any perceived sleight, small business owners may wish to look at the benefits of incorporating more closely.
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Incorporating a business.
The type and structure of the corporation may be more important than the actual act of incorporating. Although it is not the ultimate answer for every situation anybody seriously considering incorporating should look at the limited liability company (LLC).
LLC is one of the newest forms of doing business in the United States. The LLC is a hybrid between the normal C Corporation and a Limited Partnership. The LLC combines the limited liability of a corporation with the pass through taxation of a partnership.
Accepted in all 50 states as a legal entity it provides tremendous flexibility for business owners looking for the asset protection provided by a corporation with the ease of operation provided by a partnership.
Much like the corporation an LLC protects all members (owners) from individual liability for company debts and actions. A creditor of a corporation could potentially attach corporate stock and gain control of the corporation. A creditor of a LLC cannot become a member and control the company, a creditor of a LLC can only receive an income interest in the company.
In the event a Member is sued and a judgment rendered, the creditor only has an income interest of that Member. This is known as Charging Order Protection for the LLC and other Members.
It is possible for the creditor to end up with no control in the company, no money if the “losing” member does not take a distribution. If the creditor does get control of a "losing" member's distribution he would also be liable for the Members tax liability.
No control, no money and an additional tax liability is not an enviable position for the creditor. Therefore, Attorneys for the creditor are typically anxious to settle as it is in the best interest of their client. Consequently, the LLC combines the best of corporations and partnerships because the LLC offers its members protection from individual liability and, like a limited partnership, allows others to become a member only if the other members unanimously agree.
Save Money on Incorporation or LLC
Business owners can file for Incorporation or LLC on their own, saving substantial money on legal fees. Standard Legal offers do-it-yourself software to create and file these types of business structures. Details at http://www.standardlegal.com/legal-forms-software.html
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