Incorporation is the formation of a new corporation. Incorporation references many terms that cover a variety of options when legally structuring a corporation. These options include LLC, (limited liability company), corporation, S-corporation and so on.
A corporation (INC) is a separate legal entity that exists apart from those who created it and carry on its operations. This provides the owners added protection from personal liability while creating assurances for the life of the corporation. Regardless of how someone incorporates, they can change based on how the business matures.
Advantages of Incorporation
Personal Liability Protection – Owners are shielded from personal liability from company obligations and debts.
Tax Benefits – Corporations can create tax benefits but only under certain circumstances. This is one area to discuss with an accountant as the marginal tax rates for corporations with taxable incomes in some cases can be higher than those for an individual in the same scale.
Anonymity - Corporations can offer anonymity to the owners that don't want their involvement to be public knowledge.
Ownership - Corporations can transfer ownership through the transfer of securities.
Corporate Identity – Incorporating can give a greater sense of credibility to your business.
Raising Capital – Raising capital is easier through the sale of stock and securities if the business is incorporated.
Unlimited Life – Corporations can have unlimited life.
Disadvantages of Incorporation
Formalities - Corporations require annual meetings and other professional obligations from the owners.
Corporations - are more expensive to set up than LLCs
Incorporating in Delaware
Over a million businesses—more than 50 percent of publicly traded companies in the U.S., more than 60 percent of Fortune 500 companies, and more than 80 percent of recent U.S. based Initial Public Offerings (IPOs) —are incorporated in Delaware. Companies such as Facebook, Google, and Disney, incorporate in Delaware. Delaware is a haven for corporation-friendly laws. Tax laws in Delaware differ from other states, allowing corporations to be taxed at a lower rate. The state has a separate Court of Chancery that hears corporate law. These judges have a background in corporate law and decide cases relatively quickly without a jury. This creates predictable rulings that corporations benefit from.
Delaware corporations do not need to disclose officer or director names on formation documents adding another layer of privacy.
Owners do not need to be residents of the state. Shareholders, directors and officers can be the sole owner while other states may require a three person minimum to hold those positions.
Going public is a dream for many owners. Incorporating in Delaware is a smart move instead of having to convert the company later when investment bankers or venture capitalists demand it.
Form4Free can help
Form4Free offers basic Delaware company formation for free. Form4Free also provide an array of premium LLCs and premium corporations (INCs) services to their customers. International customers pay the same price U.S. based customers pay, unlike some companies that charge a very expensive fee to international customers.