In 2012 presidential contender Mitt Romney stated: “Corporations are people.” You as a person are identified through a Social Security number. If you were a corporation you would be known by an Employer Identification Number (EIN). So if you earn, say, $100,000 last year; you as a person would be taxed a lot more than you as a corporation, while all the time exposing your personal assets like your house, real estate investments, unincorporated business and car, to lawsuits and the such. ! !

The advantages to incorporating are many, primarily because the codes and rules for taxation were created by and are designed for corporations. To get the most out of these advantages you should speak with an attorney, Certified Financial Planner or tax professional to set up a tax structure that works for your business.! !

There are usually three different types of corporations to consider: an S Corp, C Corp or a partnership (LLC). You just need to know what you want to accomplish through your business. ! ! An S corporation may interest you if you want to establish a domestic corporation that consists of no more than 100 “allowable shareholders” — including individuals, certain trusts and estates. It may not include partnerships, other corporations or non-resident alien shareholders, and it may offer only one class of stock.! !


If you want to take your corporation public, perhaps a C corporation, (aka: general corporation), may interest you because you have no restrictions on the number of shareholders.! ! “A Limited Liability Company (LLC),” the IRS website explains, “is a business structure allowed by state statute. LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.” An LLC can be classified as an S corporation or as a partnership for income tax purposes. If the LLC is taxed as a partnership, the income from Schedule K-1 is shown on Schedule E and is not subject to self employment taxes.! !

Some advantages of incorporating may include:! !

1. Medical insurance for families may be fully deductible. !

2. Retirement plans, such as a tax-deferred trust can be set up as fringe benefit and may be tax deductible for the corporation.!

3. Losses are fully deductible for a corporation, whereas an individual running a sole proprietorship must prove there was a profit motive before deducting losses. !

4. Losses may be spread or carried forward usually for up to seven years in most states therefore applying a portion of those loses in profitable years, thus lowering the taxable income!

5. Profits can be left in the corporation for further expansion of the business, and this could have tax advantages.!

6. Only salaries (not profits) are subject to self-employment, or similar taxes thus avoiding double-taxation. !

7. Lease personal assets back to your corporation like your personal vehicle thus being able to deduct certain costs on your taxes. !

8. Obtain a superior financial picture to lending institutions than if you were simply a sole proprietor !

9. And of course, the limited liability and protection of personal assets for debts and liabilities taken by the corporation. ! !

If you are thinking on incorporating, get a hold of your LiBu sponsor to obtain more information to make an informed decision that is right for you. Become an LiBu Member Client, and save time and money and get incorporated right…the first time.