ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

The Benefits of Business Incorporation

Updated on November 14, 2017
sarathcp profile image

Sarath Cp, an Internet Marketing Consultant based in Cochin, India. Join me at twitter - @sarathcp92

To start off the discussion on the benefits of incorporation, we should look at what incorporation is.

What is incorporation?

According to Black’s Law Dictionary, incorporation is the act or process of forming or creating a corporation. The law treats a corporation as a person – a separate legal body from its owners - with its own rights and obligations. What was once a sole proprietorship has become a legally recognized company that is separate from you,its owner. A corporation can do things like can buy and sell property, give somebody a loan, borrow money, and employ people.

While incorporation is not for every business, for many it can mean the difference between success and failure. The major attractions of incorporation are the protection it provides to you and your shareholders on a personal asset level, as well as the many tax benefits you can capitalize on.

Why should I incorporate?

The legal advantages of incorporation lay out a very strong case in favor going through the process.

1. Protect your personal assets

This is one of the most common reasons for incorporating. As an owner of a sole proprietorship, you face legal liability for business and personal assets as creditors can go after these assets to pay business debts. On the other hand, because a corporation is a separate legal body, it is responsible for its own debts. When a corporation is properly established, you can’t be held liable for more than you have invested in the corporation – your personal assets are safe. If you have invested $50 in your corporation, you can’t lose more than that $50. Also, if you are personally bankrupt, anything owned by your corporation will remain untouched. Essentially, you may conduct your business knowing that your car, house, boat, other personal property is not at risk.

2. It lends credibility

Taking the step from sole proprietorship to corporation makes a statement that you’re serious about your business. With the creation of this professional identity, your business gathers legitimacy and authority. It is frequently the case that clients or customers prefer to conduct business with an incorporated company that is legally established and registered. It may also attract potential investors who appreciate the more permanent and reputable air corporation brings to a business.

3. Easy to transfer ownership

Ownership in a corporation can readily be transferred, sold or given away. Also, if the owner of the corporation dies, the legal structure remains the same. Should this occur in a proprietorship or partnership, property must be re-titled which is costly and involves pile of paperwork.

4. Manage retirement funds through the corporation

Retirement funds and contribution plans can be easier to set up for incorporated companies and when you retire, your funds may be left to grow within the corporation. You would receive any earnings paid out as dividends.

5. Tax benefits

Benefit deductions - As the owner of an incorporated business, you will be taxed only on your salary, bonuses and dividend payments. To reduce the taxes on these profits, you are allowed to deduct “fringe benefits” – business and operating expenses, marketing, travel expenses and so on. If you’re incorporated, medical insurance premiums are 100& deductible.

If you’re self-employed you’ll be taxed 15% of your income earned for Social Security. However, as the owner of an incorporated business, you won’t be taxed on your entire business income, only on what you take as a salary, allowing you to make considerable savings.

6. Stocks and funds

If you want your business to grow, you’ll need to be able to raise capital. An important advantage of incorporation is being able to raise this investment capital more easily. Because you have limited liability and stocks are easily transferable, your business will become more attractive to investors. Banks are also more likely to lend money to a corporation than to an unincorporated business. On a side note, if you set up a structure which allows employees to own shares in the company, this appealing benefit encourages employees to stick with you.

7. Your corporation can last forever

A corporation can literally endure forever. Even if the owner or principle member died, the corporation would continue without change. Unless the corporation went bankrupt, the shareholders would have to actively intervene to alter the course of the corporation by, for example, merging it with another business. The same holds for a partner leaving the business or when changes in management occur.

In a sole proprietor should you pass away, your business would simply dissolve and the business property and income would go into the estate where they would be available for creditors.

8. Credit rating stays strong

As a legal body, a corporation can develop its own credit rating. Your corporation can apply for a credit card, use it and build a separate credit history. This is invaluable if it happens that you experience personal financial difficulties – your credit record will not harm your corporation’s credit rating. Similarly, your personal credit standing won’t be ruined if your business fails.

While incorporation is not for every business, for many it can mean the difference between success and failure. The major attractions of incorporation are the protection it provides to you and your shareholders on a personal asset level, as well as the many tax benefits you can capitalize on.

© 2017 Sarath C P


    0 of 8192 characters used
    Post Comment

    • Crowdinvest profile image


      12 months ago from 3 Queen Street, Mayfair, London, England W1J 5PA, United Kingdom

      A very good read and helpful for startups


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)