Deciding on a business structure is one of the major components of business formation. Some individuals in Louisiana may be interested in incorporation. Therefore, it is important to understand some of the pros and cons of incorporating a business.
One major advantage of incorporation is that the owners of the corporation are not personally liable for any of the activities or debts of the business. This is because, for legal purposes, the corporation is a separate entity. However, certain formalities must be followed for owners of a corporation to retain this limited liability.
Corporations are permitted to issue stock. This can be very attractive to investors. Corporations can also offer stock options to employees, which could be attractive to potential workers as well. This is another reason why some people choose to incorporate their business.
Corporations also have an established structure with regards to how the business is managed. There are directors, officers and shareholders. All these individuals have clear roles within the corporation. This type of management structure is attractive to some who wish to have such formalities and checks and balances.
However, forming a corporation is a process that can cost time and money. Formal documents must be executed and there are filing fees. Also, there are legal formalities corporations must follow to ensure the owners of the corporation will not be liable for the corporation’s actions and debts. In addition, depending on the situation, some corporations face “double taxation.” These are some points to consider when deciding whether to incorporate.
In the end, deciding whether to incorporate a business is a big decision that can have significant implications for both the business owners and the business itself. Moreover, there are certain steps that must be followed when incorporating a business. Incorporation can be complex, and missteps along the way can cause delays and other issues. Therefore, if you decide to incorporate, it can help to have professional guidance from a business law professional throughout the process, to ensure all formalities are met and incorporation is in your best interests.