The primary advantage of incorporating is to limit your liability to the assets of the corporation only. Usually, shareholders are not liable for the debts or obligations of the corporation. So if your corporation defaults on a loan, unless you haven't personally signed for it, your personal assets won't be in jeopardy. This is not the case with a sole proprietorship or partnership. Corporations also offer many tax advantages that are not available to sole proprietors.
Some other advantages include:
-
A corporation's life is unlimited and is not dependent upon its members. If an owner dies or wishes to sell their interest, the corporation will continue to exist and do business.
-
Retirement funds and qualified retirement plans (like 401k) may be set up more easily with a corporation.
-
Ownership of a corporation is easily transferable.
-
Capital can be raised more easily through the sale of stock.
-
A corporation possesses centralized management.
