The Benefits of Incorporating a Business

Incorporating your business offers numerous advantages, including limited liability for asset protection, the creation of a distinct corporate identity, the perpetual existence of the company (lasts a lifetime into future generations), transferability of ownership, the ability to establish credit and raise capital, flexibility with the number of business owners, and potential tax savings.

Let's look at each of these in more detail.

Asset Protection Through Limited Liability 

For Example: Consider Judy's Child Care Inc., possessing $5,000 in corporate assets such as cash and day care equipment. A pandemic hits and business comes to a halt with 12 months of remaining lease payments, proper formation and execution by "Judy's Child Care Inc." shield the shareholders or owners from liability beyond the $5,000 corporate assets ( cash and day care equipment). This ensures that any outstanding lease payments are typically the responsibility of the corporation rather than the shareholders. 

In contrast, a sole proprietor (or partner in a Partnership) bears personal liability for ALL business obligations. This means that if the business owner opts not to incorporate or establish a Limited Liability Company (LLC), their personal assets, including homes, cars, savings, and investments, may be at risk to settle debts or judgments. However, it's important to note that the benefits of incorporating may be compromised in cases of fraud, neglect of corporate formalities, or asset commingling.

For robust asset protection and to evade personal liability, it is advisable for most business owners to pursue business incorporation. A well-managed C Corporation or LLC effectively limits shareholders' liability to the extent of their investment in the company. 

It's important to understand the each state has their own standards. 

The information contained in this site is specific to my home state of Georgia. 

Unsure of what structure is best for you? Refer to the site below hosted by the IRS for additional information.

https://www.irs.gov/businesses/small-businesses-self-employed/business-structures