Iowa law allows a business to incorporate and be identified as its own legal entity. An incorporated business acts in its own name, whether buying and selling property, agreeing to contracts or exercising legal rights. The Iowa Secretary of State receives and processes applications for incorporation, which must be submitted in compliance with local guidelines.
Benefits of Incorporation in Iowa
Certain advantages inure to a business in Iowa that has incorporated over one that has not. First, a corporation's liabilities can never go beyond the amount invested in the business by the owners. Had the business instead remained a collection of the owners' personal assets, the personal property of the stakeholders could be liquidated to pay the liabilities of the business, if it runs into financial issues. A corporation might also find it easier to finance itself through loans, allowing creditors in the Ottumwa 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 Iowa, 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 Ottumwa lawyer.