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 office of the Secretary of State is the agency that receives applications for incorporation in Alabama, and they must be completed in conformity with specific guidelines.

Benefits of Incorporation in Alabama

An incorporated business enjoys certain advantages, the most important being a limit of liability for the shareholders. The most shareholders can lose is the amount they invest in the business. Without incorporation, the personal property of business owners is at stake should the company become unable to pay its debts. A corporation also allows creditors in the Scottsboro area to assess the credit worthiness of the business as a whole rather than that of its owners, allowing the business to get loans more easily. Finally, 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 might charge a filing fee to process applications for incorporation. Also, the corporation will pay taxes as its own entity. In other words, the profits a corporation makes are now taxed separately, while any disbursements to shareholders are taxed as individual income. This is called double taxation. However, a business might avoid this disadvantage with proper planning and assistance from a local Scottsboro lawyer.