There are different types of business entities, each with their own disadvantages and advantages. A limited liability company might be the best structure for some companies, while others benefit more from a partnership. The same holds true for incorporation your business: is it the right move for your company at this time? Let’s take a look at some of the advantages and disadvantages of incorporating a business.
Incorporating Your Business Might Be a Good Thing.
Corporations are considered to be an entity, separate from the shareholders. Corporations can be sued, can sue others, can enter into agreements. There are some other distinct advantages to incorporating a business:
Longevity. If one shareholder leaves or sells out, the corporation still stands. The corporation does not end when an owner dies, like most sole proprietorships.
Liability. Shareholders enjoy limited liability, especially compared to other business types of business entities. However, officers of a corporation may be held personally liable for actions taken as an officer.
Taxes. Some corporations may meet the requirements to elect S Corporation status. The corporation, then, would be taxed like a partnership. This may result in lower taxes for the owners.
Residency. Unlike some other states, Alabama does not have a residency requirement. An entrepreneur living in Michigan, then, could incorporate a business in Alabama.
But There Are Some Disadvantages.
Of course, the corporate structure is not perfect for everyone:
- Start Up Costs. Forming a corporation is more expensive and time consuming than forming other types of business organizations.
- More paperwork. More documents are required to start a corporation compared to other entities. In addition, corporations face more regulations that require them to file paperwork.
- Taxes. An incorporation may result in higher taxes. Some income is taxed twice, once for the corporation and once for the shareholder.
We Can Help with Business Concerns.
The attorneys at Miller Estate and Elder Law know how to help you make informed decisions about your business. For a free consultation, contact us at 256-251-2137 or use our convenient Contact Form. Our offices are located in Anniston and Birmingham. We also assist many clients in the Gadsden, Hoover, Talladega, Vestavia Hills, and surrounding areas.
