The pros and cons of incorporating in Georgia

Among the first things that new business owners in Georgia and elsewhere must do is to decide how to structure their companies. One option they may consider is incorporation, or forming a C-corp. To help them decide if a corporation is the right structure for their needs, it behooves business owners to carefully analyze the benefits and disadvantage of this option.

According to the U.S. Small Business Administration, forming a corporation is a good option for businesses that need to raise money, plan to eventually sell or go public, and medium- and higher-risk ventures. Unlike other structure types, C-corps can sell stocks in order to raise capital. This may help to entice potential investors, as well as potential employees.

As completely separate entities from their shareholders, corporations offer business owners the greatest liability protection. For example, if a company’s product causes a user to suffer serious injuries, the corporation may be held liable for any resulting legal action. However, the owners’ personal assets may not be at risk.

A downside to incorporation is how these companies are taxed. According to FindLaw, corporations themselves are taxed for any profits. If shareholders are paid dividends on those profits, they may be double-taxed. This is because, in addition to the company paying on them, the shareholders will also be liable for them on their personal income taxes.

FindLaw also points out that C-corps may be subject to more strict operational guidelines. In order to ensure they are functioning as separate entities from their owners, corporations must adhere to certain formalities. This includes maintaining corporate activity logs and holding regular meetings of their directors.

How people choose to structure their companies may significantly impact their operation, as well as the longevity and success of their businesses.

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