The main advantages of incorporating your business are asset protection through limited liability, corporate identity creation, perpetual life, transferability of ownership, the ability to build credit and raise capital, flexibility with business owners, and tax savings. The best part is that incorporating with Fintech Harbor Consulting is a great option because there are attorneys who are ready to help you. Let’s detail each corporation-starting benefit.
Starting a Corporation: 5 Benefits
- Limited Liability for Asset Protection
A well-formed corporation has its own Federal Tax Identification Number. The corporation is liable for its debts, not its owners.
The corporation fulfilled its purpose and protected shareholders’ assets.
A sole proprietor (or partner in a partnership) is personally liable for all business obligations. Thus, a business owner who did not incorporate or form a Limited Liability Company may lose their homes, cars, savings, and investments to pay off debts or judgments. If the business commits fraud, ignores corporate formalities, or muddles assets, incorporating may lose its benefits.
To protect assets and avoid personal liability, most business owners should incorporate. A well-run Corporation or LLC limits shareholder liability to their investment and uses the help of a fintech startup lawyer.
- Corporate Identity Creation
Marketing studies show that adding “Incorporated” or “LLC” to a business name builds trust. Being honest and legitimate in business is a surefire way to succeed.
- Business Forever
Corporations have separate legal identities and perpetual lives. Thus, the business may last for generations.
Dying sole proprietors end their businesses. The life of a Corporation is endless until it dissolves. Corporation shares can be sold, gifted, or bequeathed.
- Ownership Transferability
A sole proprietorship remains with its owner and cannot be sold. The corporation is a great way to transfer ownership: Exchange assets for stock to transfer ownership.
- Build credit and raise capital
Don’t underestimate the power of business value to raise capital. Corporations historically formed entities with distributed ownership. It is like dividing an enterprise’s value into many pieces. Holding the majority of shares retain control, while selling others raises investment capital.
Partial ownership may attract risk-takers. The stock has immediate and potential value. Many private equity firms only invest when they have stock. Non-corporations can’t use this.
Basic incorporation steps
The details of incorporation vary by state. Please consult your state’s laws, but here are some common incorporation steps:
- List company names to incorporate. All state-incorporated corporations have distinctive names. State regulations vary, but formal communication and advertising must include “Inc.” or “Corp.”
- Make company directors. These positions vary by state and corporation type and are not required to be shareholders. Smaller firms often have directors.
- Register incorporation articles with the state. Certain states have “corporate friendly.” forms for incorporated companies. Finding states with low corporation taxes might help you incorporate. States have varied incorporation costs, although $500 is typical.
- Form corporate bylaws. The legal operations of the corporation will be outlined. Bylaws must include everything to avoid lawsuits. Clear rules that address common difficulties can assist.
- Board of directors’ first meeting. This is a formal meeting with minutes and first bylaw votes.
- Obtain any necessary company licenses like license forex broker or permits.
- Corporate shareholders receive stock certificates.
- Post required notices in local media (usually the legal section).
Incorporation: Need Professional Help?
Start-ups are exciting, but you need a Fintech Harbor Consulting lawyer to avoid mistakes that could hurt your business. From planning to operations, Fintech Harbor Consulting wants to help you achieve your business goals. Contact their business startup lawyer today for more information on our legal services!