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
Advantages of incorporation are many. The primary benefit is that the liabilities of the business can only be satisfied by the assets specifically invested into the company by the owners. 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. A corporation may also find it easier to finance itself through loans, allowing creditors in the Summerfield area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. Lastly, the ownership stake in a corporation can be apportioned into uniform slices, known as "shares" of stock. This makes it possible to sell ownership investments in more manageable slices.
Costs of Incorporation
Along with a possible fee to file for incorporation in North Carolina, there are other costs that corporations incur. The most important is that a corporation is taxed 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 Summerfield lawyer, you can avoid this disadvantage.