In Kentucky, businesses are allowed to incorporate, thereby becoming their own legal entities. After incorporation, buying and selling property, assenting to contracts and exercising legal rights are considered acts of the business itself and not its owners. The office of the Secretary of State is the agency that receives applications for incorporation in Kentucky, and they must be completed in conformity with certain guidelines.
Benefits of Incorporation in Kentucky
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. With unincorporated businesses, personal property of owners can be liquidated in order to satisfy the liabilities of the business. Also, creditors in the Elizabethtown area typically prefer to deal with corporations, since a loan is an investment more easily evaluated when the credit-worthiness of various owners is not an issue. 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
Along with a possible fee to file for incorporation in Kentucky, there are other costs that corporations incur. The most important is that a corporation is taxed as its own entity. Disbursements to the owners of the corporation are also taxed as individual income, so this means earnings may be taxed twice. But this double taxation can be avoided with proper planning and help from a local Elizabethtown lawyer.