Arkansas 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 operating 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 Arkansas, and they must be completed in conformity with particular guidelines.
Benefits of Incorporation in Arkansas
Benefits 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. With unincorporated businesses, personal property of owners can be liquidated in order to fulfill the liabilities of the business. A corporation might also find it easier to finance itself through loans, allowing creditors in the Maumelle area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. Lastly, ownership of a corporation is divided into equal portions or "shares" of stock, which may be bought and sold much more easily than the ownership of an unincorporated business.
Costs of Incorporation
Along with a possible fee to apply for incorporation in Arkansas, there are other costs that corporations incur. The most important is that a corporation is taxed 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 Maumelle lawyer.