An Introduction to Corporations
In the US alone, hundreds of thousands of companies or businesses are registered each year. According to the Small Business Association (SBA), there are about 627,000 new businesses that open up each year. At its peak, 670,000 companies and businesses were established in 2006. However, close to 595,000 businesses close each year (according to statistics gathered in 2008).
Because of the risk of closure, major businesses think it wise to go into incorporation as compared to opening up a business under a partnership or sole proprietorship. Incorporating avoids personal liability for a potential business owner because going into a partnership or being a sole proprietor puts all personal assets at risk because corporate shareholders only risk the cost of the stocks that they acquired. With the potential risk of businesses getting into a legal battle with people who have a laundry list of complaints that they could place against existing businesses, going into incorporation is potentially one of the most inexpensive ways to protect your business.
A simple corporation is quite easy to start up. In the next few articles, we will explain to you as simple as we can on how you could do it yourself. A simple corporation is a business where there are five or so shareholders that are all actively involved in the business.
If you are going to sell shares of stocks of your business, especially to people who are not active in your business, it would be advisable to sell it in multiple states or have it done with the assistance of an attorney. Failing to follow existing laws regarding the sale of corporate stocks (also referred to as securities) can pose dire consequences for your business and for you as the business owner.
We will also explain to you some information about the basics of corporate taxation, although it is advisable that you consult an accountant or a tax guide as to what would be best for your business. For starters, having an efficient system of bookkeeping can save you a great deal of time and money.