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 particular guidelines.
Benefits of Incorporation in Michigan
There are distinct benefits to incorporating a business. Most importantly, liabilities the business accrues may be satisfied only by assets that the owners have specifically invested in it. If the business had remained a personal asset of the owners, they would run the risk of losing their personal property to pay for the company's financial liabilities in case of default. Furthermore, a business that has not incorporated puts the unnecessary burden on creditors in the Richmond area to evaluate the credit worthiness of individual owners rather than that of the business, making loans more cumbersome. Finally, the ownership of a corporation is divided into an abundance of equal portions or "shares" of stock. Without this mechanism, transferring ownership of a business would be impractical.
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. In other words, the profits a corporation makes are now taxed separately, while any disbursements to shareholders are taxed as individual income. This is called double taxation. However, a business may avoid this disadvantage with proper planning and assistance from a local Richmond lawyer.