Many small business owners launch their companies as sole proprietorships in which they and their businesses are essentially one and the same. However, changing the format of a small business to a corporation or a Limited Liability Company (LLC) can offer a range of advantages for entrepreneurs.
How do I turn my small business into a corporation?
How to Form a Corporation
- Choose a Business Name. …
- Check Availability of Name. …
- Register a DBA Name. …
- Appoint Directors. …
- File Your Articles of Incorporation. …
- Write Your Corporate Bylaws. …
- Draft a Shareholders’ Agreement. …
- Hold Initial Board of Directors Meeting.
Can a business start as a corporation?
You can start a corporation for your small business by appointing an initial director and filing formation documents with your state’s business division.
Why would a small business be a corporation?
For small businesses, corporations are somewhat unique in that they offer their owners a form of limited personal liability. Unlike a partnership or sole proprietorship, the small business corporation structure shields the personal assets of their owners form the liabilities of the corporation.
Can one person own a corporation?
It’s totally possible. Your business can be comprised of only you—provided you get along well with yourself. You can be the CEO, Treasurer, Secretary, and the only shareholder of the company. But, just because you’re riding solo, doesn’t mean you’re exempt from following the rules.
Why would a business want to become a corporation?
The main reason for forming a corporation is to limit the liability of the owners. In a sole proprietorship or partnership, the owners are personally liable for the debts and liabilities of the business, and in many instances, creditors can go after their personal assets to collect business debts.
What qualifies as a small business corporation?
Companies that meet all of the following requirements will be able to qualify as a Small Business Corporation: … All shareholders hold no shares in any other private company. All members hold no members’ interest in any other Close Corporation. Gross income for the year of assessment does not exceed R14 million.
What is better for a small business LLC or corporation?
Both types of entities have the significant legal advantage of helping to protect assets from creditors and providing an extra layer of protection against legal liability. In general, the creation and management of an LLC are much easier and more flexible than that of a corporation.
Is it better to have a corporation or LLC?
Forming an LLC or a corporation will allow you to take advantage of limited personal liability for business obligations. LLCs are favored by small, owner-managed businesses that want flexibility without a lot of corporate formality. Corporations are a good choice for a business that plans to seek outside investment.