Significance

• One of the main purposes of incorporating a business is to create a company that has a separate legal identity from the owners of the company. The Internal Revenue Service treats a corporation like an individual taxpayer, as explained on the ReferenceForBusiness.com website. As a separate legal entity, a corporation can enter into contractual agreements, sue or get sued, as well as accumulate its own liabilities and debts.
  
  

Time Frame

• Incorporating a business allows owners of the company to create an entity that can have an unlimited existence. Unlike partnerships and sole proprietorships, a corporation can exist forever, regardless of who the directors, officers and shareholders of the company may be. Furthermore, a corporation will continue to operate even when ownership of the company changes.
  
  

Benefits

• Owners of a business may decide to incorporate as a way to establish credibility with customers and vendors. Customers may view incorporated businesses more favorably in comparison to sole proprietorships because having incorporated or corporation in the business name signals professionalism to consumers. Another benefit that can be achieved by incorporating a business comes in the area of attracting employees. Corporations may be able to attract talented employees easier than other business types by offering fringe benefits and stock, according to the ReferenceForBusiness.com website.
  
  

Considerations

• Another purpose of incorporating a business is to protect the business owner's personal assets from the company's debts, obligations and liabilities. Shareholders are not personally liable for the company's debts and obligations, unless a personal guarantee is made. A business creditor cannot pursue the assets of a shareholder as compensation for the company's debts. In addition, a shareholder's personal creditors are not allowed to pursue the corporation's assets as compensation for personal debts.
  
  

Features

• Business owners may incorporate to take advantage of certain tax benefits. Owners of a corporation that are employed by the company may participate in company sponsored life, health and death insurance plans. Corporations are allowed to deduct the cost of providing health and life insurance, as well as other fringe benefits on the corporate income tax return. Another feature of corporations that is favorable to business owners is the fact that profits are taxed at the company's corporate tax rate. A corporation's tax rate is often lower than a shareholder's personal tax rate, as explained by the Business.gov website.