Weigh the pros and cons of incorporation

Generally, preferred shares provide its shareholders preferential payments of distribution of assets or dividends, in case the company shuts down its operations. A lot of small business owners only allow shares of common stock. This is the most complex of all the business structures, but it offers the strongest personal liability protection to its owners. Because a c corporation is the most complex—and most expensive to maintain—this is usually the business structure option for companies most concerned with liability, or for those that expect to raise capital.

As mentioned above, business incorporation is a loose umbrella term that covers a variety of options for legally structuring your business. These options include becoming a limited liability company , corporation, s-corporation, non-profit 501, cooperative, and so on. Small business owners can choose to incorporate as one of two basic types of corporations. The c corporation is the more traditional of the arrangements, and is more frequently employed by large companies.

The actual fees required to incorporating service incorporate generally amount to several hundred dollars, although the total cost differs from state to state . Hiring an attorney to assist in the process can raise the cost, but several services are available on the internet to assist businesses with the incorporation process. Liability--this factor is often cited as far and away the most important advantage to incorporation. When a company incorporates, the shareholders or owners of the corporation are liable only up to the amount of money they contribute to the firm. Raising capital--incorporation is generally regarded as an indication that the owners are serious about their business enterprise, and intend to devote time and resources to the venture for a significant period of time. This factor, as well as the reporting requirements of incorporation and--in some cases--the owners' more formidable financial resources--make corporations more attractive to some lending institutions. In addition, corporations have the option of raising capital by selling shares in their business to investors.

Incorporated businesses, also called corporations, are distinct from sole proprietorships and partnerships in a number of ways. Corporations feature unique benefits that give them an advantage over other business types, but there are drawbacks to the corporate structure as well. Small businesses consider incorporating for a number of reasons, including expansion, efficiency of operations and liability protection. Share per value refers to the stated minimum value and generally doesn't correspond to the actual share value. In reality, the value of a share is based on its fair market value or the amount a buyer is willing to pay. An inc. Stipulates the exact number of shares the corporation is willing to authorize. If the corporation is willing to permit both preferred as well as common shares of stock, then this should have a mention in the articles of incorporation, along with the voting rights information.

Stockholders know that if the business they are investing in is a corporation, their personal assets are safe if the company gets into litigation or debt trouble. Even small, private, professional corporations, such as a legal or dental practice, need to adhere to the principles that govern a corporation. For instance, upon incorporation, common stock needs to be distributed to the shareholders and a board of directors elected. The most obvious difference between a corporation and other business structures is the ability of corporations to raise large sums of money by selling stock shares to investors. Instead of being centered on a single person or a small group, ownership of an incorporated business is spread out among stockholders, who have the right to vote on key business decisions.