Alabama law allows a business to incorporate and be recognized as its own legal entity. As a separate entity from the owners, the business is then considered to be operating on its own when it buys and sells property, assents to contracts and exercises legal rights. The Alabama Secretary of State receives and processes applications for incorporation, which must be submitted in compliance with local guidelines.

Benefits of Incorporation in Alabama

There are distinct benefits to incorporating a business. Most importantly, liabilities the business accrues may be satisfied only by assets that the owners have specifically invested in it. Without incorporation, the personal property of business owners is at stake should the company become unable to satisfy its debts. A corporation also allows creditors in the Columbiana area to assess the credit worthiness of the business as a whole rather than that of its owners, allowing the business to obtain loans more easily. Lastly, a corporations charter requires that ownership be divided into stakes or "shares" of stock, all of equal size. This makes the process of transferring control much more practical.

Costs of Incorporation

Incorporation comes at a price. First, Alabama may charge a filing fee to process applications for incorporation. Also, the corporation will pay taxes as its own entity. The individual incomes of owners who are paid disbursements from the corporation's earnings are still taxed as well. This is called double taxation, but it can be avoided with proper planning and assistance from a local Columbiana lawyer.