For businesses seeking recognition 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 functioning 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 certain 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 New Hanover County 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
Incorporation comes at a price. First, North Carolina may charge a filing fee to process applications for incorporation. Also, the corporation will pay taxes as its own entity. The individual incomes of the owners are still taxed also, and this can mean the same income is taxed twice, known as double taxation. With proper planning and assistance from a local New Hanover County lawyer, you can avoid this disadvantage.