Liability:
A corporation exists as a separate legal entity from your personal life. Any debts or lawsuits are incurred by the company, not the owner. Any business with potential for lawsuits should consult with a lawyer and consider incorporation. Incorporating will offer an added layer of protection but it is still adviseable to obtain business liability insurance.The bad debts will often be the responsibility of the corporation. In the case of bank financing, more and more banks require business owners to sign a personal guarantee; making your personal assets collectible on a defaulted loan. Consider your options before signing.

Taxation:
Another main benefit to incorporating is the taxation of a company. Corporations are often taxed at a lower rate and have better taxable benefits. Talk to your accountant about the tax advantages.

Raising Money:
Financing a small business as a sole proprietorship or partnership can be difficult. A corporation can sell shares of the company and raise money easier than other business structure types.

Selling the Business:
A non-corporate business is hard to valuate properly. A business corporation value will be based on the business, not the owner, therefore making it easy to sell the company.

1: Choose a Corporate Name & Address
2: Select A State to Incorporate
3: Select A Corporation Type
4: Determine Company Directors and fill other important positions
5: Complete the Articles of Incorporation and By-laws
6: Obtain Certificate of Incorporation
7: Process & File Incorporation
8: File a Registered Agent.

You may have heard people talk about “Sub-S” corporations, LLCs and PCs and their relative merits. You will need to decide which form of business is right for you. Here is a brief description of each form:

Sole Proprietorship

A sole proprietorship is a business run by an individual. The owner is the business; the owner has all of the profits and losses of the business. The owner also has all the control and all the liability from the business operations. Business taxes are paid by the owner through his or her personal income tax return.

Partnership

A partnership is a business which operates like a sole proprietorship, but with several individuals running it. The partners share the profits/losses, have control and liability for business operations. Partnership taxes are paid by the partners on their personal tax returns, in proportion to their share of ownership.

Corporation (or C-Corporation)

A corporation is a business which is set up as a separate legal entity from its owners. The Board of Directors makes operational decisions. Owners are protected (shielded) from liabilities of the corporation, and the corporation pays corporate income taxes.

S-Corporation (or Subchapter-S Corporation)

A small business corporation may elect to be classified as an S-Corporation, to have the liability protection of corporate status, but taxed at individual rates.

Limited Liability Company (LLC)

A limited liability company is formed by “members” whose liability is limited to their investment. An LLC is often used in place of partnerships to limit liability, while having the option of being taxed through the personal tax returns of the members.