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 certain guidelines.
Benefits of Incorporation in Michigan
A corporation enjoys benefits that unincorporated companies do not. Primarily, it cannot be held accountable for an amount of debt greater than the value of the assets that the owners have invested in it. Had the business remained unincorporated, owners risk losing their personal property should the business become unable to fulfill its liabilities. Furthermore, banks in the Monroe 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. Lastly, a corporation's ownership stake is divided into equal slices or "shares" of stock, which make investments in the business much easier to transfer.
Costs of Incorporation
Incorporation comes at a price. First, Michigan may charge a filing fee to process applications for incorporation. Also, the corporation will pay taxes 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 Monroe lawyer, you can avoid this disadvantage.