Should you incorporate your business?
By David Walker, Attorney at Law
Many business people face the decision of whether to incorporate their business. The decision whether to incorporate usually involves a desire to limit the owner's personal liability while operating a business.
Also, there are various tax advantages and disadvantages involved in making this decision.
And, there is more to the decision now, because another option to the corporation has come about - the limited liability company. For many businesses the limited liability company is the better choice. Corporations and limited liability companies are sometimes known as business entities. Which business entity should you choose for your business?
Either a corporation or an LLC offers protection from personal liability for the owners. Any business that has employees driving vehicles, is involved in construction or remodeling of any kind, that handles other people's property, or that has offices where members of the public come and go, should consider operating as a corporation or LLC. If a person is injured by an employee, or on the premises of the business, the owners of the business are not responsible personally for this liability. The business itself and its assets would be exposed to this liability instead.
A corporation or LLC also offers management structure through electing officers and directors. The LLC can be more flexible in this area, and sometimes is the better choice for that reason.
Investors can be brought in to either type of entity; either allows investors to be brought in without necessarily having the full power of a partner. However, one should be careful, and get legal advice in doing this, as securities law questions can be involved.
Aside from non-tax advantages, a business can gain tax advantages by becoming a corporation or LLC. Tax questions are usually answered by the corporation’s accountant or other tax adviser. Attorneys routinely work with accountants providing a corporation or LLC the best tax advantages.
One common tax related question is whether to become an S corporation. Some confusion arises with the terms C corporation and S corporation. These are designations that arise under income tax law.
A corporation is a C corporation unless it files an election with the IRS to become an S corporation. If it becomes an S corporation, it is commonly said it is taxed like a partnership. This means losses or income pass through the corporation to the individual. This can be an advantage if a business has tax losses that can be applied to other individual income. Again, a person's tax advisor should be consulted as to this decision.
If there is only one owner of the business, an S corporation may be a better choice because of tax issues involving self-employment income.
Another consideration for incorporated businesses is that there may be better options for retirement planning than for an unincorporated business.
As far as non-legal matters go, I have been told that people felt their business image is better if the business is a corporation, even if the business is a one owner business. A more solid business appearance may result.
We would be happy to discuss the pros and cons of incorporation, LLC’s and related business questions. Meeting the needs of business clients is an important part of our practice.
David Sinclair Walker, Jr. P.C. P.O.BOX 871329, Stone Mountain GA 30087;
North Gwinnett Office - 6340 Sugarloaf Parkway, Suite 200, Duluth GA 30097;
South Gwinnett Office - 2330 Scenic Highway, Snellville GA 30078
Telephone 770-972-3803; Facsimile 770-921-7418 email firstname.lastname@example.org
-Admitted in GA and D.C. -UGA Law ’76 -Certified Mediator -Georgia Bar No. 731725770) 972-3803 or visit http://www.walker-law-firm.com/