Why Incorporate?

It's no wonder that roughly a million corporations are formed each year and the number is growing every year. It's really no wonder at all that so many people create legal persons to do things that would otherwise be impossible. Yet, I am amazed that so many people put vast restrictions on their capabilities by not utilizing the versatile person that can do everything but think, that is a corporation. Perhaps some people are lazy, maybe they are too busy to grow in their capability to succeed, maybe they think they already know everything about business, it's hard to say. Some people see the light but just refuse to act and grab the benefits available to them, but I think most people are just like I am many times, and possibly like you may be at times: they start to think about what they could do with a corporation, and it's all over from there. The word "corporation" is like the name "trust" or "conglomerate", it makes people think, "What could I do with that? I'm not even sure what it is, what it does, or how it relates to me."

In brief, a corporation is a legal, artificial person, a person that is separate, distinct and apart from you. It is not you. You are not it. It is a distinct, different and totally separate legal or artificial person. A corporation is a distinct legal entity. It is separate and apart from its employees, stockholders, directors or officers. Although it's a separate entity, it can act only through its stockholders, officers, or agents. A corporation can have no knowledge or belief on any subject independent of the knowledge or belief of its people. A stockholder (owner or partial owner) is a holder of shares of stock in the corporation and is not in any legal danger. A stockholder is not the employer of those working for the corporation, nor is he the owner of corporate property.

His liability is limited entirely to the money he has put into this separate legal person. A corporation can buy, trade, sell and make loans, literally anything you as a person can do, it's thoughts and actions are simply documented by resolutions. When you think it through, the possibilities become fascinating. It seems so simple-and it is. That's the beauty of it!

Who Can Benefit By Incorporating?

Now that you've seen what a corporation is, a natural question would be, who should incorporate? To decide whether or not incorporating is for you, you need to ask yourself a few questions. The first question you should ask is, "what is my liability picture?" The second question you should ask is, "do I have assets that I wish to protect?" Thirdly, you should ask yourself if incorporating would benefit you from a tax perspective.

Anyone who is involved in a business or profession where they interact with people, clients, or businesses should also be incorporated. If a business deal goes sour, or if a mistake is made in handling a customer's request or business, then the first reaction today is to sue. Today, even nuisance lawsuits are dangerous.

Of course, anyone in a potentially hazardous business, such as contracting, excavating, heavy equipment operation or the like should incorporate. The potential for personal harm to people working for the company, innocent bystanders, or those looking for a quick buck is huge in these types of businesses.

People who are involved in joint ventures or partnerships should consider incorporation. If you are in a partnership with a person and that person does something to get the partnership sued your personal assets are on the line as well as theirs. By contrast, if the business were a corporation instead of a partnership, this would not be the case.

Simply owning an asset can create liability. Any person who owns an asset that could be associated with liability should incorporate and put that asset into the corporation. This would limit their liability and a potential lawsuit to that one asset and protect the other assets they have.

It's a risky world out there in business. Incorporating doesn't eliminate lawsuits, but it cuts down on a person's deep pockets. Generally, all an incorporated business risks is what's in the corporation. The personal assets of Shareholders are not at risk. This is valuable protection in a litigious, dangerous world. Why should a person in business risk all of the assets he has spent a lifetime building up? Why should he risk his family's welfare? There's no good reason, especially when they can do a simple thing like incorporating to limit their exposure.

If you're in business or going into business, the time to incorporate is now, actually yesterday would not have been too soon. If a lawsuit comes tomorrow, the amount of money you spend to incorporate will seem like peanuts.

Aside from the liability protection incorporating affords, it can also provide may tax benefits for those thinking of starting a business. When all is said and done, incorporating is beneficial to most people. It is beneficial in the area of liability protection as well as tax savings.