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 certain 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. Without incorporation, the personal property of business owners is at stake should the company become unable to fulfill its debts. Furthermore, banks in the Swartz Creek area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of receiving corporate loans simpler. Finally, a corporations charter requires that ownership be divided into stakes or "shares" of stock, all of equal size. This makes the process of transferring control much more practical.
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. 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 might avoid this disadvantage with proper planning and assistance from a local Swartz Creek lawyer.