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 particular guidelines.
Benefits of Incorporation in Kentucky
Benefits of incorporation are many. The primary benefit is that the liabilities of the business can only be satisfied by the assets specifically invested into the company by the owners. If the business had remained a personal asset of the owners, they could run the risk of losing their personal property to pay for the company's financial liabilities in case of default. Furthermore, banks in the Pikeville 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. Finally, a corporations charter requires that ownership be divided into stakes or "shares" of stock, all of equal size. This makes the process of transferring control much more practical.
Costs of Incorporation
Incorporation can be costly. First, a modest filing fee might be charged in Kentucky for any business that wants to incorporate. Also, a corporation is taxed as its own entity. The individual incomes of the owners are still taxed also, and this can mean the same income is taxed twice, known as double taxation. With proper planning and assistance from a local Pikeville lawyer, you can avoid this disadvantage.