Why Incorporate a Business

When asking why incorporate a business, it becomes clear that many owners are not fully aware of the many reasons for incorporating small business. Many people run their small businesses as sole proprietorships for many years. However, as tax time comes round, you might be dismayed to see how much of your business income goes to pay taxes for a sole proprietorship. This is when many small business owners begin to consider how to incorporate business and what options are available for incorporation.

One big reason why businesses decide to incorporate is that in the United States business law favors corporate interests, giving them rights, privileges and protections that are often no longer available to individuals. This goes back to an early Supreme Court case that had an amendment added to it by a law clerk. The case was Santa Clara Co. vs. Southern Pacific Railroad, and the law clerk essentially wrote his own words into the judge's opinion. The wording he added caused corporations to be considered as natural human beings, and gave them the same rights as humans under the 14th Amendment of the Constitution. This classification has been the entry point for some large businesses to influenced lawmakers to favor legislation that helped them to grow in power and size.

When it comes to incorporating, small business owners know that this legal process allows them to take on some risk without the danger of losing all of their possessions should the business fold. There are benefits that come with all types of incorporation, but they vary depending upon how your business structure is set up.