Reduce Personal Liability
A corporation is a separate legal presence from the one or ones who own it. Therefore, when a corporation is sued, there are provisions in the law to protect the owners (shareholders) and mangers (officers and directors) from personal liability. Once you do business with the public or have even one employee, you are wide open to liability. There are thousands of people who lose nearly everything they have due to personal liability with their unincorporated businesses. In addition, once you do incorporate it is important that your business follows certain, relatively simple, formalities so that it looks and acts like a corporation. A corporation can provide a legal shield between your business life and your personal life.

Add Credibility
A corporation has greater credibility in the eyes of many customers and lenders than does a sole proprietorship. When you have taken the step to incorporate it is perceived that you have long-range plans for your business. With this added trust, you increase the conformability for customers and lenders to do business with you. In this regard, a corporation may, indeed, increase your profits and ability to expand.

Tax Advantages
There are more allowable tax deductions available to corporations than to businesses that are not incorporated. You're afforded much more flexibility with regards to how you earn and save your profits. A few examples include medical expenses, pension plan, business trips and entertainment. It is reported the group with the highest percentage of tax audits is the one that includes the Schedule "C" form filed by the self-employed. The audit rate for corporations is much lower than the self-employed. You may own and be employed by your corporation at time same time, thus, eliminating the Schedule "C" self-employment return from your list of filed IRS tax documents. The IRS seems to give preferential treatment to corporations with regard to tax deduction.

Anonymity
Owning an asset in your own name, such as a business, an investment property or an automobile, provides an easy target for one performing an asset search. Before initiating a lawsuit, it is quite common for an attorney to perform an asset search. If no assets can be located in your name this may decrease the chance that litigation will be pursued. Placing assets in the name of a corporation or limited liability company may provide a cloak of privacy between you and those contemplating legal action against you.

Raising Capital
There is a greater source of capital available to corporations than to partnerships or proprietorships. Because the corporation is separate from the owners, people tend to be more willing to invest money without accepting liability or responsibility for company business. The wealthiest Americans are those who hold the highest percentage of their wealth through ownership of stock in corporations they or their family members started. Many sole-proprietorship or partnership businesses are sold for one to two times annual earnings. Whereas, many corporations are valued at between 12 to 25 times annual earnings or more.

Separate Liability for Corporate Debts
A corporation is separate from those who own it. If the corporation loses a lawsuit or has a debit it cannot pay, the corporation itself is responsible. The corporation can provide a strong shield to protect the personal assets of the officers, directors and shareholders. In contrast, with a sole proprietorship or partnership, the owners can lose personal assets in a business lawsuit. If the officers and/or directors have personally guaranteed corporate debts, of course, they can be held liable. In addition, the corporation must be established and operated properly for the corporate shield to remain in place. For maximum protection, it is legally prudent to treat the corporation as a separate legal entity. For example, it is important to pay corporate expenses with corporate money (or be sure the corporation promptly reimburses you for business expenses if you have paid them personally). Conversely, you would not pay your personal electric bill with corporate money. Instead, the corporation pays you a salary from the corporate checking account (which is a tax-deduction for the corporation). You deposit your salary check in to your personal checking account and use those funds to pay your personal electrical bill.

Broad Range of Powers
A corporation may engage in any lawful activity, including, but not limited to the following:

• Has the power to hold, purchase and convey real property and personal property and to mortgage or lease any such real and personal estate with its authorization. A corporation has the power to hold real and personal property in any state, territory or country.
  
  
• Has the power to make contracts.
  
  
• May exist continuously, even after the death of the owner(s).
  
  
• Has the power to borrow money when necessary for the transaction of its business, or for the exercise of its corporate rights, privileges or franchises, or for any other lawful purpose of its incorporation.
  
  
• Has the power to sue and be sued in any court of law or equity.A corporation can issue bonds, promissory notes, bills of exchange, debentures, and other obligations and evidences of indebtedness, payable at a specified time or times, or payable upon the happening of a specified event or events, whether secured by mortgage, pledge or otherwise, or unsecured, for money borrowed, or in payment for property purchased, or acquired, or for any other lawful object.
  
  
• Has have power to appoint such officers and agents as the affairs of the corporation shall require, and to allow them suitable compensation.
  
  
• Has the power to make By-Laws not inconsistent with the constitution or laws of the United States, or of the State in which the corporation is formed, for the management, regulation and government of its affairs and property, the transfer of its stock, the transaction of its business, and the calling and holding of meetings of its stockholders.
  
  
• Has the power to wind up and dissolve itself, or be wound up or dissolved.
  
  
• Has the power to adopt and use a corporate seal or stamp, and alter the same at pleasure.
  
  
• Has the power to guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of the shares of the capital stock of, or any bonds, securities or evidences of the indebtedness created by, any other corporation, while owners of such stock, bonds, securities or evidences of indebtedness, to exercise all the rights, powers and privileges of ownership, including the right to vote, if any.
  
  
• Has the power to purchase, hold, sell and transfer shares of its own capital stock, and use therefore its capital, capital surplus, surplus, or other property or fund.
  
  
• Has the power to conduct business, have one or more offices, and hold, purchase, mortgage and convey real and personal property in any of the several states, territories, possessions and dependencies of the United States, the District of Columbia, and any foreign countries as allowed by law.
  
  
• Has the power to do all and everything necessary and proper for the accomplishment of the objects enumerated in its certificate or articles of incorporation, or any amendment thereof, or necessary or incidental to the protection and benefit of the corporation, and, in general, to carry on any lawful business necessary or incidental to the attainment of the objects of the corporation, whether or not such business is similar in nature to the objects set forth in the certificate or articles of incorporation of the corporation, or any amendment thereof.
  
  
• Has the power to make donations for the public welfare or for charitable, scientific or educational purposes.
  
  
• Has the power to enter into partnerships, general or limited, or joint ventures, in connection with any lawful activities, as may be allowed by law.
  
  

Corporate Formalities
Corporations have shareholders, officers and directors. One person can hold all positions in most states. A corporation is also required to hold annual shareholders and directors meetings. Personal and corporate funds should not be commingled in the same account. If corporate formalities are not followed (e.g.. the corporation is not treated like a separate person from the owners), many states allow the owners, officers or directors to be held liable debts of the corporation. Corporate formalities, while necessary, are typically quite simple. A corporation is properly formed when the required documents are filed with the Secretary of State.