Alabama law allows a business to incorporate and be identified as its own legal entity. As a separate entity from the owners, the business is then considered to be acting 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 advantages 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 pay its debts. Furthermore, a business that has not incorporated puts the unnecessary burden on creditors in the Daphne area to evaluate the credit worthiness of individual owners rather than that of the business, making loans more difficult. Finally, the ownership stake in a corporation can be apportioned into uniform slices, known as "shares" of stock. This makes it possible to sell ownership investments in more manageable slices.
Costs of Incorporation
Incorporation can be costly. First, a modest filing fee might be charged in Alabama for any business that wants to incorporate. Also, a corporation is taxed as its own entity. Disbursements to the owners of the corporation are also taxed as individual income, so this means earnings might be taxed twice. But this double taxation can be avoided with proper planning and help from a local Daphne lawyer.