In Michigan, businesses are allowed to incorporate, thereby becoming their own legal entities. An incorporated business acts in its own name, whether buying and selling property, assenting to contracts or exercising legal rights. To incorporate in Michigan, a business must file with the Secretary of State in compliance with specific guidelines.
Benefits of Incorporation in Michigan
Certain benefits 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 satisfy the liabilities of the business. Furthermore, banks in the Genesee County area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of obtaining corporate loans simpler. 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 can be costly. First, a modest filing fee may be charged in Michigan for any business that wants to incorporate. Also, 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 Genesee County lawyer.