In Michigan, businesses are allowed to incorporate, thereby becoming their own legal entities. When an incorporated business acts, whether it is to buy and sell property, agree to contracts or exercise legal rights, the process is then attributable to the business itself and not its owners. A business looking to incorporate in Michigan must file with the Secretary of State in accordance with established guidelines.
Benefits of Incorporation in Michigan
Certain advantages inure to a business in Michigan 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. With unincorporated businesses, personal property of owners can be liquidated in order to fulfill the liabilities of the business. A corporation might also find it easier to finance itself through loans, allowing creditors in the Ann Arbor area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. Finally, the ownership stake in a corporation can be apportioned into uniform slices, known as "shares" of stock. This makes it possible to sell ownership investments in more manageable slices.
Costs of Incorporation
These benefits come at a price. First, incorporation in Michigan may require a filing fee. Second, a corporation pays taxes just like any other entity. Disbursements to the owners of the corporation are also taxed as individual income, so this means earnings might be taxed twice. But this double taxation can be avoided with proper planning and help from a local Ann Arbor lawyer.