- Protection from corporate debts and obligations. – One of the greatest benefits of incorporating your business is the separation of your personal and your business assets. What this means is that if your business ever faces a lawsuit or other legal obligation, your personal assets will be protected, provided you have followed and obeyed all of the legal requirements of maintaining a valid corporate entity.
- Tax benefits -Incorporation can also provide several tax benefits. For example, you may be eligible to take advantage of greater tax deductions for your business and your employees. Benefits such as health insurance, life insurance, and travel and entertainment expenses may be deductible. In addition, a corporation that elects Subchapter S tax status can avoid double taxation of corporate profits and dividends.
- Access to capital – Another benefit to incorporation is access to capital. Forming a corporation allows you to raise capital through the sale of stock to shareholders. Additionally, shareholders will generally have the ability to transfer or sell their stock to other investors.
- Perpetual existence – Because a corporation is an entity created by operation of law, it will continue to exist even if the ownership or management changes. Unlike a sole proprietorship or partnership, the life of a corporation is not dependent on the life of a particular individual or individuals. Thus, a corporation can continue indefinitely until it accomplishes its objective, merges with another business, or is legally dissolved.
To take advantage of these benefits, you must follow the rules required under North Carolina law. This includes keeping adequate financial records for the corporation, keeping up to date with required filings, treating the corporation as a separate entity, holding and documenting meetings, and being careful with distribution during insolvency. Without following these rules, you may inadvertently subject yourself to liability under a legal doctrine known as “piercing the corporate veil.”
Finally, although incorporation can provide many benefits, it may not be the right decision for your business. In some situations, the cost and time associated with making sure you are in compliance with all of the legal formalities may not be worth it. A knowledgeable attorney can help you decide if incorporation is right for you.
The attorneys at Fisher Stark have the knowledge and experience to assist you with all of the decisions regarding the incorporation of your North Carolina business. We can provide you with advice regarding the best type of business entity for your needs and also assist you with the filing of all required documents necessary for incorporation. Even after your business has successfully incorporated, we will assist you in assuring that your corporate entity complies with all of the relevant rules and requirements under state law.
Last updated 7/5/2015