Thinking Of Incorporating? Some Key Considerations

If you have a successful business that is starting to grow and expand it's time to think about turning your business into a corporation if you have not already done so. Incorporating a business is a big step and you need to consider it carefully. Here are some key details about this important topic.


One of the main reasons to form a corporation is to reduce your personal liability in case the company is sued and forced to pay damages. The law limits the liability of corporate owners in cases like this. For example, if you are one of the stockholders of a corporation which is forced to pay damages due to a lawsuit, only the assets of the corporation are at risk in most instances. Your personal assets, such as your home or any personal bank accounts, cannot be taken to pay creditors. A few exceptions to this rule exist so it's best to check with an attorney to make certain that you fully understand this legal concept.


Even though your company will have limited liability under the law after you incorporate, that does not help your business if it's hit with a major lawsuit. If your company loses the suit and the damages awarded to the plaintiff are large enough your company might be severely harmed financially and even forced to shut down.

For this reason, obtaining a liability insurance policy is a key step when you decide to incorporate. The policy will protect the corporation in case a judgment is rendered against the company and you must pay compensation a plaintiff. An important point to keep in mind is that, generally, a policy of this type is not going to pay legitimate business debts.


Corporations are taxed by both the state in which the company operates and the federal government. The laws regarding corporation taxes are not the same as the laws governing income taxes for an individual. Different rules are applied to corporations compared with an individual at both the state and federal level. Typically, your cooperation will be taxed based on its net profits, with a range of deductions allowed under the law.

It's crucial that you fully understand all of the considerations listed above even though some of them are rather complex. To get a better understanding of everything that is involved in setting up a corporation you will need excellent legal advice. To learn more contact an experienced corporate lawyer in your city or check out a site like