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Corporate Matters: Incorporation Basics

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A foreign entity or individual planning on making an acquisition or conducting some other form of commercial activity in the United States must consider what type of U.S. entity to use in that endeavor. We thought it might be helpful to set out the options and answer an even more basic question for those considering activity in the United States: Why should you incorporate?

There are many advantages to conducting business through a properly formed business entity:

  • Asset Protection. C corporations and limited liability companies generally allow owners to separate and protect their personal assets in the event of a lawsuit or claims against the business entity.
  • Name Protection. Most states will not allow another business to form an entity with the same name as an already existing entity. Once you have filed an organizational document with a State’s Secretary of State another entity cannot be formed with the same name.
  • Credibility. In many instances, consumers, vendors and partners may prefer to do business with an incorporated entity.
  • Tax Flexibility. Assuming you have no plans to go public, you generally will be able to choose whether your entity will be subject to a corporation income tax or whether profits and losses will be “passed through” to the shareholder, partner, or member.