One of the first things any new business owner must do is choose what type of business entity is best for the business. Each type has advantages and disadvantages.
Forming your business as a limited liability company or corporation can be beneficial for several reasons.
Benefits of corporations
When you run your business as a sole proprietorship or partnership, creditors can go after your personal assets to settle the debts of your business. Both corporations and limited liability companies protect the personal assets of business owners. Corporations may sell stock to raise funds. Some corporations are eligible for state incentives.
Benefits of LLCs
In addition to the limited liability protection, LLCs enjoy less complex regulations than corporations, such as no requirement to maintain meeting minutes. LLCs also have increased flexibility in how they can distribute profits. LLC owners benefit from flow-through taxation that eliminates the double taxation corporations experience.
State incentive programs
The Enterprise Zone program provides tax incentives for startups that locate their facilities in designated enterprise zones. Incentives include tax credits and low-interest business loans.
The state also offers several tax exemptions for small and medium-sized businesses:
- Corporate business tax exemptions for domestic and foreign corporations
- Sales and use tax exemptions for startups
- Real and personal property tax exemptions for businesses that purchase or install manufacturing equipment
When choosing the formation type for your business, it is important to consider both the benefits of the formation type and the incentive programs available to determine which type is best for your company.