Under South Dakota law, a business may incorporate. If it chooses to do so, it is thereafter identified as its own legal entity. After incorporation, buying and selling property, agreeing to contracts and exercising legal rights are considered acts of the business itself and not its owners. To incorporate in South Dakota, a business must file with the Secretary of State in compliance with specific guidelines.
Benefits of Incorporation in South Dakota
There are distinct advantages 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 could run the risk of losing their personal property to pay for the company's financial liabilities in case of default. Also, creditors in the Brandon area generally 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. Finally, 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
These benefits come at a price. First, incorporation in South Dakota may require a filing fee. Second, a corporation pays taxes just like any other entity. The incomes of owners as individuals are also taxed of course, meaning that income to the corporation might be subject to double taxation. However, this disadvantage can be avoided with proper planning and help from a local Brandon lawyer.