Advantages and disadvantages of incorporation

Answer 1

* Regulatory and Record keeping Requirements-Corporate operations are governed by local, state, and federal regulations to a greater degree than are other businesses. * Added Cost of Doing Business-Regulatory and record keeping guidelines and requirements often make it necessary for corporations to make additional investments (in accounting staffing, etc.) devoted to seeing that those legal requirements are met. In addition, there are fees associated with incorporating that business partnerships and sole proprietorships are not subject to. * "Double" Taxation-People who are owners of a corporation, and who also work as an employee of the business, can receive financial compensation in two different ways. In addition to receiving a salary or wages for work performed, the owner may also receive a dividend or distribution on the stock that he or she owns. Any distribution of income to stockholders via dividends is taxable, however, if the corporation is organized as a "C corporation." This is sometimes called "double taxation" in recognition of the fact that such income has in reality been taxed twice, first when the corporation paid taxes on its profits, and secondly when the dividends were distributed. Companies that register as an "S corporation," however, are able to avoid this added tax. * Separation of Finances-While incorporation provides significant protection of owners' personal assets from repercussions of business downturns, it also means that a business owner is not allowed to tap into the corporation's account for assistance in meeting personal debts.

Answer 2

Incorporating means forming a company or other type of business entity. Business man can operate a business as a sole proprietor however there are certain benefits in incorporating an company or Limited Liability Company.

One of them is Limited Liability. The members of an Limited Liability Company or Corporation are not personally liable for the debts accumulated by the Limited Liability Company, however there are few exceptions to these rule.

There are also drawback like more complicated bookkeeping.

Answer 3

By incorporating your business, you are protecting your personal assets, such as your home, cars, and personal bank accounts in the area of liability/law suits.