The Benefits of Incorporating
Obtaining personal liability protection for owners
While the Texas LLC is has become the most popular entity choice, the Texas corporation was king for many decades. The primary reason for incorporating is to obtain the personal liability protection for the owners of the business. The liability protection is a major benefit, here is a list of the key benefits of a Texas corporation:
- Limited Personal Liability: The shareholders of a Texas corporation are protected from the liabilities and creditors of the corporation as long as the corporation is formed properly with the proper documentation and operated properly. As attorneys who routinely handle Texas business formations, you can be confident that we will ensure that your corporation is formed properly. In addition, we will provide written guidance on how to operate your corporation properly so that the liability protection is not compromised.
- Perpetual Existence: Unlike a sole proprietorship, a corporation can survive the death of its owner(s). This is important because your clients, vendors, and employees want to know that the business will survive even if its owner(s) do not.
- Added Credibility & Professionalism: Whether you are forming alliances with business partners, hiring employees, or signing contracts with vendors, a business with "LLC" or "Inc." at the end of its name can have a significantly positive effect on perception.
- Tax Advantages: As with any business entity, you can deduct ("write off") your legitimate business expenses from your corporation’s income, which can greatly lower the profits reported to the IRS.
Advantages of a Corporation over other entity choices
- Raising Capital: Corporations are specifically designed for raising capital (i.e. selling shares of stock).
- Transferability: The ownership of a corporation can be easily changed by the sale of shares of stock.
- Taxation: The Texas corporation has unique tax benefits and consequences. Read more on Corporate Taxation.
- History: The corporation is the oldest type of business entity. It is historically viewed as the most successful and most prestigious type of business entity.