It is fairly common for people to start a business as a corporation, or to incorporate their business later on as their needs change. That being said, a corporation is not necessarily the best type of business organization for every company. But what exactly are the benefits of forming a corporation, and is it a good idea for your business?
What is a Corporation?
In essence, a corporation is a type of business that, unlike many other business organizations, is considered an entirely different legal entity from its owners. This is known as the “legal fiction of corporate personhood,” a sort of collective agreement to view a corporation as a “person” independent from its leadership and its shareholders. This means that it is considered the “owner” of its own assets, profits, and debts, and also that it can be sued or prosecuted for alleged wrongdoing.
How Does a Corporation Work?
When you want to form a corporation, you first file articles of incorporation with the Secretary of State of whichever state you want to incorporate in. After forming a corporation, you then must carry out certain acts, such as appointing executives and directors, holding shareholder meetings, and holding meetings of the board of directors. You also must make sure to keep separate bank accounts and books from the corporation’s owners, even if the corporation is solely owned by one person.
What are the Benefits of Forming a Corporation?
The biggest benefit of forming a corporation is that it can help protect you against legal and financial liability. This is because all of a corporation’s debts and liabilities belong to it, not you, so creditors and litigants cannot normally go after your personal assets to satisfy debts or judgments related to the corporation. In some cases, you may also get significant tax benefits, especially if you file as Subchapter S Corporation (also known as an S-Corp).
What Should You Do?
Ultimately, the question of how to organize your business will depend on your personal circumstances and needs. That is why you should speak to a lawyer with experience handling business law matters, who can help advise you on what might work best for you. The sooner you get in contact, the sooner they can begin working on your behalf.
If you have a business law issue, give the Law Office of Andrew Ross Sack a call. Andrew Ross Sack is a New York and New Jersey business lawyer who has considerable experience in handling the many aspects of business law. To schedule a consultation with New York City/Long Island/Westchester business lawyer Andrew Ross Sack, call (516) 526-3319 or visit his contact page.
