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

Advantages of incorporation are many. The primary benefit is that the liabilities of the business can only be satisfied by the assets specifically invested into the company by the owners. If the business had remained a personal asset of the owners, they would run the risk of losing their personal property to pay for the company's financial liabilities in case of default. Furthermore, banks in the Gardendale area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of acquiring corporate loans simpler. 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

These advantages come at a price. First, incorporation in Alabama may require a filing fee. Second, a corporation pays taxes just like any other entity. Disbursements to the owners of the corporation are also taxed as individual income, so this means earnings may be taxed twice. But this double taxation can be avoided with proper planning and help from a local Gardendale lawyer.