Why incorporate?  The following are some of the main reasons to form a corporation or LLC:

To safeguard your personal assets against the claims of creditors and lawsuits. Sole proprietors and general partners in a partnership are personally responsible for all the liabilities of the business, such as loans, accounts payable and potential lawsuits. In a corporation, however, stockholders, directors and officers typically are not liable for the company's debts and obligations. You can also use a corporation or LLC to hold your personal assets like a house, car or boat. If you are ever personally involved in a lawsuit or bankruptcy, these assets will be protected. A creditor of the owner of a corporation or LLC cannot seize the assets of the company.  Ownership in a corporation or LLC is easily transferable to others. In Delaware, the transfer of ownership in a corporation in not required to be filed or recorded anywhere.  Retirement funds and qualified retirement plans (like 401k) may be set up more easily with a corporation. Your corporation can also fully deduct the cost of paying its owner's health insurance.

Corporations are taxed at a lower rate than individuals. Also, they can own shares in another corporation and receive corporate dividends 80% tax-free.  There are no limits on the amount of losses a corporation may carry forward to subsequent tax years. A sole proprietorship, on the other hand, cannot claim a capital loss greater than $3,000 unless the owner has offsetting capital gains.  Leasing your personally owned property (real estate, automobile, or even a domain name) to a corporation may provide tax savings to many individuals.  Capital from investors can be raised easily through the sale of stock.  A corporation is capable of continuing indefinitely. Its existence is not affected by the death of shareholders, directors, or officers of the corporation.  Regardless of your personal credit score, you can build a separate credit history for your corporation by applying for and using corporate credit.

7 Advantages of Incorporating Your Business
Advantages of incorporation over other business entities

Incorporating your business has several advantages over the other common business entities that you have to choose from. This article will explain seven of the advantages of incorporation, and maybe one or more of them will be just what you're looking for as you decide whether to incorporate your own business or not.

It's pretty much a given that hard work and a little luck goes a long way towards helping you succeed. But a little knowledge, especially when it comes to properly setting up your business, will help you stay successful. 

While most business people give lots of thought to location, store décor, hiring employees, customer service, and management issues, choosing the proper business structure doesn't get the attention that it deserves.

Many entrepreneurs don't realize this, but the organization type they choose can often determine the difference between success and failure, especially in today's litigious society. If you have a desire to succeed, you need all the advantages you can get. High on the list of safe bets is incorporating your business. 

Incorporating, while definitely not for everyone, offers several distinct legal and financial advantages over the other types of entities.

Here are seven advantages of incorporating your business: 

1. Asset protection - If you operate as a partnership or sole proprietor, you're subject to virtually unlimited personal liability for lawsuits or business debts.
   
   If you ever go out of business or get sued, your personal assets including your home, vehicles, jewelry, bank accounts, etc. are all up for grabs.
   
   This is generally not the case when you incorporate. When you incorporate you're responsible only for your investment in the corporation.
   
   In fact, the limited liability feature of a corporation, while not a rock solid guarantee, is for sure one of the best reasons for incorporating.
    
2. Corporations are usually much easier to sell and are more attractive to prospective buyers than either a partnership or sole proprietorship. This is due to the fact that a new buyer won't be held personally liable for any wrongdoings or missteps on the part of the previous owner.
   
   For example, if someone buys a sole proprietorship, the new owner can be held personally liable for any mistakes or legal violations on the part of the previous owner, even if the new owner had nothing to do with it! But with a corporation, this is usually not the case.
    
3. Tax savings - Incorporating your business provides several tax advantages that don't exist for other business entities.
   
   When you incorporate, you create a new, separate, and distinct legal entity. Because of this, many transactions can be structured between you and your corporation to save a lot of money on taxes.
   
   One example: If you own a building, you can rent office or warehouse space to your corporation and claim depreciation and other tax deductions for it. Your corporation can in turn claim the rental expense. You can't do this if you're a sole proprietor or a partner in a partnership.
    
4. Privacy and confidentiality - Incorporating is a great way to keep your identity as well as your business affairs private and confidential.
   
   If you want to start a business, yet remain anonymous, a corporation is the best way to do it. States such as Delaware, Florida, and Nevada offer substantial privacy protection for corporations and their shareholders.
    
5. Easier to raise capital - When you want to raise money through loans or investment, being a corporation can make finding and getting the capital you need much easier.
   
   You can simply sell shares of stock if you want to take on investors. If you need a loan, a corporation adds clout when dealing with lending institutions.
    
6. Perpetuity - As mentioned above, when you incorporate your business you create a new, separate, and distinct legal entity. This separate and distinct entity (the corporation) can live on almost forever regardless of what happens to the shareholders, directors, or officers.
   
   This isn't the case with partnerships, sole proprietorships, or even limited liability companies. The loss of the owner or a partner will either end the business altogether or throw it into a maze of red tape.
    
7. Increases credibility - In today's world, most people feel more confident and secure dealing with a corporation as opposed to other business entities. Having CORP. or INC. after your company's name adds an instant air of credibility and professionalism to your business dealings.

Always be sure to consult with your business advisor and/or attorney before evaluating any important legal or financial decisions.

While incorporating provides several legal and liability advantages, as I've said before, it isn't for everyone or every business. But you owe it to yourself to find out if it can help you!