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 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
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. Without incorporation, the personal property of business owners is at stake should the company become unable to satisfy its debts. Furthermore, banks in the Rocky Mount area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of acquiring corporate loans simpler. Finally, 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
Incorporation can be costly. First, a modest filing fee may be charged in North Carolina for any business that wants to incorporate. Also, a corporation is taxed as its own 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 may avoid this disadvantage with proper planning and assistance from a local Rocky Mount lawyer.