A certificate of incorporation basically means that the company is now a separate legal entity from the companies owners meaning that the owners are not directly responsible for debt of the company but still essentially control the company.
A certificate of incorporation means that the company is now a corporation. Certificates of incorporation can be obtained for a few types of incorporations. A certificate of incorporation is obtained when the proper articles of incorporation have been completed, filed and all fees
have been paid.
There can be many advantages to incorporating. The main advantage is the limited liability it gives the shareholders so that if something goes wrong they are not liable to pay any of the company’s debts. Incorporating also means that the company is not as dependent on its
members so if that owner dies, the company can easily go on as the separate entity it is, and continue to do business. Also as a corporation, ownership is also more easily moveable.
On the other hand there are some disadvantages of incorporating. One of the main disadvantages is double taxation. The profits of a corporation are taxed twice when the profits go out to members as dividends since they first as taxed as income to the corporation and then again as income to the members. There can also be more expense with forming a corporation
and require more thorough record keeping.
Another option is to form an S corporation. Standard corporations must pay income tax on income made that is taxable. Making an S corporation can be a way to keep the corporation from being handled as an individual taxable entity. This pretty much means that the corporation has decided to elect a special tax status with the IRS, thus letting it not be treated separately as a taxable entity. In order to become this type of corporation, the corporation can have no more than seventy-five shareholders.
A third type of corporation is a limited liability company or LLC. This is not really a partnership or a corporation. An LLC is a different type that offers an alternative to both.
There are advantage and disadvantages to an LLC as well. Advantages include pass through taxation, meaning the company’s earnings are taxed only once. The owner liability in an LLC is done by how much the person has invested in the company.
Some of the disadvantages are that there is generally more paperwork than a partnership. An LLC is also a newer type of business and thus not as recognizable to others.
If you decide to incorporate, no matter what option your company may choose, always make sure to look through all the different options that are available to your company. Research may prove that what you thought was right was really the wrong option and an option you never heard of or did not know much about is the perfect one for your company. So just keep in mind to do all your research, looking online is a good place to start because you get a wealth of different types of resources at your fingertips.By Lauren Culliton