Under Tennessee 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. In Tennessee, the process of incorporation is begun by filing with the Secretary of State in accordance with certain guidelines.
Benefits of Incorporation in Tennessee
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. Had the business instead remained a collection of the owners' personal assets, the personal property of the stakeholders could be liquidated to pay the liabilities of the business, if it runs into financial issues. Furthermore, a business that has not incorporated puts the unnecessary burden on creditors in the Jefferson City area to evaluate the credit worthiness of individual owners rather than that of the business, making loans more difficult. 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 Tennessee 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 Jefferson City lawyer, you can avoid this disadvantage.