Why You Should Incorporate Your Business, And Why You Should Use a Lawyer When You Do
There are several reasons why it may make sense for you to incorporate. These reasons should be weighed against the possible disadvantages of a corporate structure before deciding if incorporation is right for your business. An experienced corporate lawyer can assist you with this determination.
- Limited Liability – with a corporation your liability is limited to the amount of your investment in the corporation. With a sole proprietorship you personally assume all of the liabilities of the business, and your personal assets are at risk to satisfy the liabilities of your business. Personal asset protection, through a corporate structure, is a huge benefit of incorporating.
- Perpetual Existence – as long as you stay current with your corporate filings, a corporation doesn’t die. As a sole proprietor when you die, so does your business. Likewise, it may be more attractive to a potential purchaser of your business if you’ve been operating through a corporation (which is a separate legal entity), rather than having your business and personal affairs intertwined.
- More Financing Alternatives – with a corporation you can raise money by issuing shares or debentures, rather than being limited to just borrowing like you would be with a sole proprietorship.
- Income Management – with a corporation you can decide to leave money in the corporation, rather than bring it all into income in a year that you’re in a high tax bracket. You can also income split with your spouse through the corporation paying dividends to shareholders, which may reduce your overall tax burden.
- Potential Tax Savings – there may be tax advantages to incorporating, or there may not be… depending on your circumstances. You should consult your accountant to discuss if there would be tax reasons for your business to incorporate.
Conducting your business through a corporation can also: (i) add credibility; (ii) provide name protection for your business; and (iii) provide anonymity for the owners of the business.
Whatever your reasons are for incorporating, please seek the advice of a lawyer instead of incorporating on your own through a registry. When incorporating through Olson Law Group, in addition to the incorporation, your corporation will also be organized and provided with a minute book. We will prepare organizational resolutions that adopt the corporate bylaws, appoint officers, set the fiscal year end, accept subscriptions for shares and set the number of directors, among other things.
In addition, when you incorporate through Olson Law Group you will receive legal advice relating to your articles of incorporation. It is important that you have an appropriate share structure for your corporation from day one so you can avoid the additional expense associated with amending your articles. Olson Law Group will also ensure that your articles contain the appropriate “restrictions on transfer” and “other provisions” necessary for your corporation to be able to rely on the “private issuer” exemption when issuing shares from treasury (if this doesn’t make sense to you, please speak with an experienced corporate lawyer).
If you’re ready to incorporate, need assistance deciding if you should incorporate, or need assistance cleaning up a corporation that was incorporated without the assistance of a lawyer, please call Olson Law Group at 587-757-9393 to book an appointment.