• 7809 Airline Drive, Suite 201, Metairie, Louisiana 70003. USA
  • 504.298.DOCS

Advantages of Incorporating

  • The personal liability of the founders is limited to the amount of money put into the Corporation (with the exception of unpaid taxes).
  • If a business owner wishes to raise capital, a Corporation is more attractive to investors who can purchase shares of stock in it for purposes of raising capital.
  • A Corporation does not pay tax on monies it receives in exchange for its stock.
  • There are many more tax options available to Corporations than to proprietorships or partnerships. One can set up pension, profit sharing, stock option plans that are favorable to the owner(s) (stockholders) of the Corporation.
  • A Corporation can be continued more easily in the event of the death of its owners or principals. Shares of a Corporation can easily be distributed to family members.
  • The owner(s) (stockholders) of a Corporation that is discontinued due to its being unsuccessful can have all the advantages of being incorporated, yet be able to deduct on an individual tax return or on a joint return of money invested in the Corporation from personal income.
  • The owner(s) (stockholders), of a Corporation can operate with all the advantages of a Corporation, yet be taxed on personal income tax rates if this option provides a tax advantage.
  • Owner(s) (stockholders) can quickly transfer their ownership interest represented by shares of stock without the Corporation dissolving.
  • The Corporation’s capital can be expanded by issuing and selling additional shares of stock.
  • Shares of stock can be used for estate and family planning.
  • The Corporation can ease the tax burden of its stockholders by accumulating its earnings. This is providing the accumulation is not unreasonable and is for a business purpose.
  • It is separate and legal “being”, separate and apart from its owner(s) (stockholders).
  • It can sue and be sued and can enter contracts.
  • A Corporation may own shares in another Corporation and receive dividends, a percentage of which are tax free.
  • A Corporation’s Federal Income tax rates may be lower than the owner(s) (stockholders) individual tax rates, especially for a company with taxable income in the $28,000 to $100,000 range.

It is separate and legal “being”, separate and apart from its owner(s) (stockholders).

Maintaining the Corporate records may require added time.

Disadvantages of Incorporating

  • The owner(s) (stockholders) of a Corporation file two tax returns, individual and Corporate. This may require added time and expense. (The owner of a proprietorship files one return and a member of a partnership files two.)
  • If the net taxable income of a business is substantial , i.e. $75,000 or more, there may not be tax advantages. (However, in businesses where there is personal liability on the part of the owner(s), it may be desirable to incorporate even if the income is modest.)
  • Maintaining the Corporate records may require added time.
  • If debt financing is obtained by a Corporation, i.e. a loan from a bank, the fund source may require the personal guarantee by the owner(s) thereby eliminating the limited liability advantage of a Corporation at least to the extent of the loan.
About Us

mi1Corporation Services, Inc. provides legal help with the formation of business entities such partnerships, limited liability companies, and corporations in the State of Louisiana.

 
  • 7809 Airline Drive, Suite 201, Metairie, LA 70003. USA
  • 504.298.DOCS
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