For businesses seeking recognition as separate legal entities, North Carolina law allows them to undergo the process of incorporation. This means that the business may buy or sell property, offer and accept contracts and exercise legal rights in its own name. A business seeking to incorporate in North Carolina must file with the Secretary of State in accordance with established guidelines.
Benefits of Incorporation in North Carolina
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. Also, creditors in the Durham area typically 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. Lastly, 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
There are costs associated with incorporation, both short and long term. First, businesses in North Carolina may be charged a fee to incorporate. Also, a corporation is taxed as its own 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 can be avoided with proper planning and assistance from a local Durham lawyer.