Incorporation is the process of forming a corporate entity. An important reason for incorporating is to limit the personal liability of the business owners for the debts and liabilities of the business. By forming a corporation you substantially insulate your personal assets from lawsuits and claims against your business. People with claims against the business can only reach as far as the corporate assets and can’t take the personal assets of the people who own and operate the corporation.
Unlike sole proprietorships or partnerships, the corporation is a separate taxable entity. Business income can be sheltered in the corporation and reported and taxed at the business (corporate) level only. The decision as to how much money should be kept in the corporation and how much should be paid out to the owners is completely in the hands of the people who own the corporation. In addition, since the corporation is a separate taxable entity, the instant you incorporate your business you become an employee of your own corporation, eligible for tax-deductible employee fringe benefits. In effect, once you incorporate, you are truly working for yourself.
Your tax preparer or advisor can help you decide if incorporation would be beneficial for your business. About Justice will prepare and file your documents with the Secretary of State, obtain a tax ID number for the corporation and provide you with your corporate book, seal, stock certificates, bylaws and templates for corporate minutes.