When a business is incorporated, a legal person is created that is separate and distinct from its owners. Like individuals, a corporation can enter into contracts, lend and borrow money, sue and be sued, and own property.
Some of the benefits of incorporating include:
• Limited Liability – The liability of the owners of the corporation is limited to their investment in the corporation and are not personally responsible for the debts of the corporation.
• Lower Tax Rates – Corporate tax rates are generally lower than personal tax rates so incorporating may provide significant tax savings. • Access to Capital – Corporations can sell shares of the company to raise money and are more likely to be eligible for a bank loan compared to unincorporated businesses.
• Enhanced Credibility – Corporations are generally perceived as being more stable than unincorporated businesses.
• Continuous Existence – A corporation can continue indefinitely while unincorporated businesses cease to exist when their owners die.