Appellate Practice Attorney serving New York, NY
It is easier, and cheaper, to start a business without incorporating, but not significantly so. This probably shouldn't be a major factor in deciding whether or not you should incorporate your business. The primary reason why most people who incorporate do so is to limit their liability. The individual owners of a corporation, its shareholders, are generally not personally liable for the corporation's debts. For example, if you personally operate a business and one of your employees injures someone in the course and scope of that employee's employment, you personally can be liable to the injured party. If, however, the corporation operates the business, in most cases only the corporation is liable for any debts incurred, and only corporate assets, not a shareholder's personal assets, can be used to satisfy that obligation. There are other advantages, such as the ease of raising capital or transferring the business (by selling stock), but the main advantage is limited liability. The main disadvantage is double taxation - the corporation is taxed on its profits, and then the shareholders are taxed on dividends they receive from the corporation, although there are structures which can minimize these obstacles (like a subchapter s corporation). Only you, and advisers who are familiar with all the relevant facts, can decide which structure is best for you.
Answered on Jul 23rd, 2012 at 4:12 PM