Deciding on Business Structure Before you incorporate, consider these pros and cons.
The corporate structure is more complex and expensive than mostother business structures. A corporation is an independent legalentity that's separate from its owners, and, as such, itrequires complying with more regulations and tax requirements.
The biggest benefit for a small-business owner who decides toincorporate is the liability protection he or she receives. Acorporation's debt is not considered that of its owners, so ifyou organize your business as a corporation, you're not puttingyour personal assets at risk. Also, a corporation can retain someof its profits without the owner paying tax.
Another plus is the ability of a corporation to raise money. Acorporation can sell stock, either common or preferred, to raisefunds. Corporations also continue indefinitely--even of one of theshareholders dies, sells the shares or becomes disabled.
The corporate structure, however, comes with a number ofdownsides as well. A major one is higher costs. Corporations areformed under the laws of each state with its own set ofregulations. You'll probably need the assistance of an attorneyto guide you. In addition, because a corporation must follow morecomplex rules and regulations than a partnership or a soleproprietorship, it requires more accounting and tax-preparationservices.
Excerpted from Start Your Own Business: The Only Start-Up GuideYou'll Ever Need