For businesses seeking identification as separate legal entities, North Carolina law allows them to undergo the process of incorporation. As a separate entity from the owners, the business is then considered to be operating on its own when it buys and sells property, assents to contracts and exercises legal rights. To incorporate in North Carolina, a business must file with the Secretary of State in compliance with particular guidelines.
Benefits of Incorporation in North Carolina
A corporation enjoys advantages 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. Without incorporation, the personal property of business owners is at stake should the company become unable to satisfy its debts. Furthermore, banks in the Lewisville 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. Lastly, 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
These benefits come at a price. First, incorporation in North Carolina 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 Lewisville lawyer.