Iowa law allows a business to incorporate and be recognized as its own legal entity. An incorporated business acts in its own name, whether buying and selling property, assenting to contracts or exercising legal rights. In Iowa, the process of incorporation is begun by filing with the Secretary of State in accordance with particular guidelines.
Benefits of Incorporation in Iowa
An incorporated business enjoys certain benefits, 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 satisfy its debts. Furthermore, a business that has not incorporated puts the unnecessary burden on creditors in the Adel area to evaluate the credit worthiness of individual owners rather than that of the business, making loans more cumbersome. Finally, the ownership of a corporation is divided into an abundance of equal portions or "shares" of stock. Without this mechanism, transferring ownership of a business would be impractical.
Costs of Incorporation
These advantages come at a price. First, incorporation in Iowa may require a filing fee. Second, a corporation pays taxes just like any other 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 may avoid this disadvantage with proper planning and assistance from a local Adel lawyer.