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. Without incorporation, the personal property of business owners is at stake should the company become unable to satisfy its debts. Furthermore, banks in the Sioux City area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of receiving corporate loans simpler. Lastly, 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 benefits come at a price. First, incorporation in Iowa may require a filing fee. Second, a corporation pays taxes just like any other entity. The individual incomes of owners who are paid disbursements from the corporation's earnings are still taxed as well. This is called double taxation, but it may be avoided with proper planning and assistance from a local Sioux City lawyer.