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, agreeing 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
There are distinct advantages to incorporating a business. Most importantly, liabilities the business accrues may be satisfied only by assets that the owners have specifically invested in it. With unincorporated businesses, personal property of owners can be liquidated in order to fulfill the liabilities of the business. Also, creditors in the Southfield area generally prefer to deal with corporations, since a loan is an investment more easily evaluated when the credit-worthiness of various owners is not an issue. 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. The individual incomes of owners who are paid disbursements from the corporation's earnings are still taxed as well. This is called double taxation, but it may be avoided with proper planning and assistance from a local Southfield lawyer.