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What are some pros and cons of forming a corporation?

One of the first decisions you will make during business formation and planning is choosing a structure for your enterprise. Common business structures include Limited Liability Company (LLC), partnerships and corporations. This post will discuss corporations so that you can get a head start on learning about business structures.

As you might expect, all business structures have advantages and disadvantages. During the early stages of business formation and planning, it is up to you to weigh these factors and to make the choice that meets your needs.

Acquiring legal guidance is a great way to help you make this and other important decisions. In the meantime, you can prepare for your lawyer consultation by reviewing a few of the advantages and disadvantages of incorporating your business.

Corporation advantages

  • Limits liability: A corporation shields you from a certain amount of liability, which protects your separate, personal assets.
  • Attracts investors: Unlike other structures, a corporation may draw investors to your enterprise.
  • Establishes structure: Incorporation enables you to set up an efficient structure for your business with managers, employees, directors, etc.

Corporation disadvantages

  • Double taxation: This can occur when the business itself pays taxes and then any shareholders in the business also pay taxes on their profits.
  • Corporate formalities: Incorporating a business means abiding by specific formalities such as holding regular director meetings and keeping careful records.
  • Costs and time: You must pay several filing fees to the Minnesota Secretary of State's office and it can take quite a while to file the required documents for incorporation.

Despite the disadvantages, incorporating can add to the success of your business. You can learn more by discussing these topics with an experienced business formation and planning attorney.

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