Benefits of Incorporating Your Business
Published on Thursday, 31 March 2011 09:26 Written by Julie L. Schneck
Creating a corporation is like creating a new way of life for your business. A corporation is a separate and distinct business entity that is responsible for itself. Upon forming a corporation, the entity (“Corporation”) issues shares of stock to shareholders, the investors or owners. The shareholders exchange money and/or goods, or contribute their expertise to receive shares of stock.
A board of directors is a group of people elected by the owners of a business entity, who have decision-making authority, voting authority, and specific responsibilities which in each case is separate and distinct from the authority and responsibilities of owners and managers of the business entity. In essence, the board members represent the interests of the shareholders in the company operations.
The business owner in many small corporations may be the primary, or only, shareholder and only board member. This same person could also be listed as the president, secretary, and treasurer of the corporation.
“The corporation is liable for its own financial and civil obligations”
The corporation pays taxes on its annual profits and passes the profits to the shareholders in the form of dividends. The board of directors determines the amount of the dividends. The major benefit associated with a corporate business form is the corporation is liable for its own financial and civil obligations.. The shareholders risk only the amount of money they have invested in their respective shares of stock.
Let's assume that the business is a corporation with $100,000 in its bank account. If someone were to secure a judgment against it for $500,000, the company would most likely go out of business and only $100,000 would change hands. The person who won a legal judgment against a corporation would have no immediate legal basis for getting money from the shareholders personally. However, this is not the case with a partnership or sole proprietorship. As a partner or sole proprietor, your personal finances are put squarely at risk in this scenario, and you could lose a lifetime of work. You might end up owing an additional $100,000 to the judgment holder if that situation ever came to pass.
There are certain procedures to follow to incorporate in the Commonwealth of Pennsylvania. If you want a new way of business life that takes gives you personal protection, contact the Attorneys at Lawrence D. Brudy & Associates, Inc. to get the process started.
For more information, please email Julie L. Morris, Paralegal at This e-mail address is being protected from spambots. You need JavaScript enabled to view it.