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. 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 benefits 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 pay its debts. Furthermore, a business that has not incorporated puts the unnecessary burden on creditors in the Spirit Lake area to evaluate the credit worthiness of individual owners rather than that of the business, making loans more cumbersome. Finally, 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
Incorporation comes at a price. First, Iowa may 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 may avoid this disadvantage with proper planning and assistance from a local Spirit Lake lawyer.