In Kentucky, businesses are allowed to incorporate, thereby becoming their own legal entities. After incorporation, buying and selling property, agreeing 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
Certain advantages inure to a business in Kentucky 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. Furthermore, a business that has not incorporated puts the unnecessary burden on creditors in the Greenville area to evaluate the credit worthiness of individual owners rather than that of the business, making loans more difficult. 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
There are costs associated with incorporation, both short and long term. First, businesses in Kentucky might be charged a fee to incorporate. Also, a corporation is taxed as its own 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 Greenville lawyer.