Overview of Incorporating your business
Incorporating your business may have a positive or negative impact on your financial holdings as well as your Federal tax liability. Hence, whether you will be consulting with an attorney, receiving advice from your CPA, or simply intend to self incorporate, understanding the different business/corporate structures available and possessing an overall understanding of the incorporation process should increase the likelihood that you will make the decision that is best-suited to help you be successful in your endeavor.
Please remember, there is no substitute for legal advise. This site cannot serve as a substitute for legal counsel or advise you as to what decision is best for you.
Small Claims Court
In most jurisdictions, any officer or director or employee can appear in small
claims court on behalf of the corporation.
Broad Range of Powers
As a separate legal entity, a corporation has the power to act in any way
permitted by law and by its own corporate charter. For example, a corporation
can enter into contracts, buy and sell both real and personal property, sue and
be sued, and can even be responsible for breaking the law (i.e. committing a
crime).
Separate Liability for Corporate Debts
As a separate legal entity, a corporation is responsible for its own debts.
Normally, shareholders, directors, and officers are not responsible for
corporate liabilities. If the corporation suffers losses, the corporation
itself must bear those losses to the extent of its own resources, and not the
personal assets of the individual shareholders. In effect, however,
shareholders indirectly bear these losses by a decline in the value of the
stock they hold in the corporation.
Note however, that shareholders, directors, and/or officers may be held liable
for the debts of the corporation where the court imposes "alter-ego liability"
or where the individual has personally guaranteed the corporate debt.
Separate Legal Entity Status
A corporation is a separate legal entity existing under authority granted by
state law. It has its own identity separate and apart from its
shareholders/owners.
Perpetual Duration
A corporation is capable of continuing indefinitely. Its existence is not
affected by the death or incapacity of shareholders, directors, or officers of
the corporation.
Duration of Corporation Compared to LLC
An LLC has a limited existence. Absent a contrary agreement, a limited
liability company (LLC) is dissolved upon the death, withdrawal, or bankruptcy
of a member unless the business is continued by unanimous vote of the remaining
members. Although the operating agreement can be drafted to avoid such a
result, the life of the LLC is still limited to the termination date in the
Articles of Organization.
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