What is a corporation?
A corporation is a separate legal entity existing under authority granted by state law. Unlike a sole proprietor or partnership where the owners are personally responsible for the debts of a business, a corporation has its own identity separate apart from its shareholders/owners.
To be formed, an Incorporator must file Articles of Incorporation and pay the requisite state fees and prepaid taxes with the appropriate state agency (usually, the Secretary of State). A corporation is required to have a board of directors, corporate officers, annual shareholders meetings, and to maintain separate books and records.
Protect Your Personal Assets: The primary reason small business owners choose to form corporations is to protect their personal assets, such as their home, car or family savings. In the event of a lawsuit or if your business should fail, your personal assets cannot be touched assuming you have properly formed and maintained your corporation. The corporation’s limited liability feature is not available in a sole proprietorship or partnership, where the owner participants are personally liable for all business debts and actions.
Continuous Life: The life of a corporation, unlike that of a partnership or sole proprietorship, does not expire upon the death of its stockholders, directors or officers. This can be helpful to a surviving spouse who needs to continue running the business. If an owner dies or wishes to sell their interest the corporation will continue to exist and do business.
Raising Capital: A corporation has many avenues to raise capital that are not available to a sole proprietorship or partnership. One of the most common ways a corporation can raise capital is through the sale of stocks. Typically, stockholders are not liable for the debts and obligations of the corporation thus providing investors some security through this type of investment.
Build Corporate Business Credit: Doing business as a corporation allows a business owner to separate business credit from personal credit. A corporation since it is a separate entity can open a bank account through a corporate ID number rather than a personal Social Security number. By using a tax ID number a corporation can build credit autonomously and is not limited by a personal FICO score.
These are just a few advantages of incorporating so please contact Contractors State License Services for more information. CSLS has been helping businesses incorporate for nearly ten years and can have your business incorporated in as little as three to five business days.
Call CSLS at 800 303-4691 and start your corporation set-up today!