Under Rhode Island law, a business may incorporate. If it chooses to do so, it is thereafter identified as its own legal entity. 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. A business looking to incorporate in Rhode Island must file with the Secretary of State in accordance with established guidelines.
Benefits of Incorporation in Rhode Island
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. If the business had remained a personal asset of the owners, they could run the risk of losing their personal property to pay for the company's financial liabilities in case of default. A corporation might also find it easier to finance itself through loans, allowing creditors in the Barrington area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. Finally, a corporation's ownership stake is divided into equal slices or "shares" of stock, which make investments in the business much easier to transfer.
Costs of Incorporation
There are costs associated with incorporation, both short and long term. First, businesses in Rhode Island might be charged a fee to incorporate. Also, 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 Barrington lawyer, you can avoid this disadvantage.