When you incorporate a business, you are making the enterprise its own distinct legal and financial structure. It is considered a separate entity from the sole proprietors or general partners who founded it. The following is an introduction to common types of business incorporation, why distinguishing it matters, and how an attorney can help in the process.

Types

In a Limited Liability Company (LLC), the assets are owned by the company itself, which limits individual owners' liabilities for business debts and lawsuits. An LLC does not pay separate taxes, but rather individual owners claim profits and losses on their personal tax returns.

This has some overlap with S-Corporations, a business designation that offers owners the ability to reduce the amount paid as part of self-employment taxes while still providing the benefit of pass-through taxation, in which owners claim profits and losses as part of their personal income.

In a C-corporation, the business—not the individual owners—pays the company's taxes. The corporate tax rate is considerably lower than it is for individual filers. Lastly, a nonprofit corporation is one that is exempt from taxes because the work they do provides some benefit to society.

Advantages

There are two main advantages of incorporating a business. The first has to do with taxation. Depending on the type of structure you form and the size and scope of your business, taxes may be reduced, either through pass-through taxation, a lower tax rate, or fewer requirements for employment-related taxes.

The other concerns personal liability. No business owner wants to lose their home or nest egg over a legal issue. Most types of incorporation offer some amount of personal protection in the event of a lawsuit.

How an Attorney Can Help

Every business has unique needs and considerations that must be accounted for before deciding on a structure. An attorney will work with you to review your business's profits and losses, current taxation situation, number of owners or partners, and plans for future growth. From there, the most appropriate type of incorporation can be established. Your lawyer will also handle the various paperwork involved in incorporation, from registering a name to drawing up agreements and bylaws. An attorney might help you find other professionals as well—businesses whose services will be vital in growing your company, such as tax preparers and accountants, real estate agents, banks, and funding sources.

Corey C. Davis, CPA, Attorney at Law, is here to help you incorporate your business. For over 10 years, he has been providing Kerr County, TX, with legal advice and accounting support. From tax return help to legal representation in IRS matters, he will work to protect your rights and interests. Visit his website to explore his services further. Then call (830) 257-8800 to schedule a consultation.