A business that is legally registered with the state and federal government is often called a corporation.
A corporation is a “legal person” formed separately from those who own and operate the corporation. It is called an entity because it is not a living person, it is actually an “artificial person” with its own legal rights, liabilities and responsibilities.
As an “artificial person” the corporation’s debts and taxes can be separated from its owners (shareholders) or its officers and directors, thereby offering personal liability protection, tax advantages and a way to borrow money that does not report on the owners personal credit.
Why Incorporate?
Why should you take the time and trouble to form a business entity like a corporation or an LLC?
Incorporating can offer you many advantages that you will not enjoy if you engage in business or investing activity in your personal name.
Understand that you will put your personal assets at risk and be personally liable for any legal issues that arise unless you do your business activity under the name of a registered business entity.
In addition to personal liability protection, incorporation assures attractive tax benefits and financing advantages. Corporations can also own real estate, automobiles, yachts, or aircraft without the owner’s personal name being attached to the asset or debt.
And because the corporation continues to exist even after the death of a shareholder, it offers tremendous estate planning advantages.
Tax Savings!
How much could you save on taxes by owning a business?
Corporations are entitled by law to numerous tax deductions that are not available to individuals. Corporations have a lower federal tax rate at all levels of income.
The cost of forming and registering a business entity can be immediately recovered in tax savings.
How to Start a Business
Listed below are some very simple instructions and suggestions that will assist you in setting up your own business.
1. Once you have chosen a name you can fill out the paperwork yourself over the internet
2. Or, you may hire a company to assist you in filling out the paperwork
3. Or you can hire an advisor to do it for you.
How to do it yourself using option number one:
Simply go online and register your new business yourself by doing a search for the “Secretary of State’s” site in your state. Once there under forms you will find a form which you can complete in order to register your new business. Typically the fee’s run between $35 to $70 to file a new business name.
You will also need a “federal employer identification number” herein referred to as FEIN. Once you have received your paperwork from your Secretary of State’s office you can contact the IRS to obtain a FEIN. There is no charge by the IRS to get this number.
The power in using my system lies in using the name of your business and if necessary your FEIN, to secure new business lines of credit that do not report any activity on your personal credit report. That means when a lender reviews your or your business partner’s personal credit references and agrees to lend money to your new business, that activity will not be reported on a personal credit report. By starting a business, you are creating a separate entity, and any activity that you do in the name of that business will only be reported under the FEIN of the business.
The reason “The Ultimate Real Estate Investor’s Guide” works so well is because we are taking advantage of a system that was created to keep business activity separate from personal activity. It allows you to maintain a healthy business and it assists you in building a strong business entity. In the future, as your business grows, you will be able to acquire larger lines of business credit because your business has developed its own successful identity that is completely separate from your personal one.
You will not need a business plan or business financials to start acquiring business credit. Over time as your business grows, you can use the tools of this separate business entity to get access to millions of dollars in capital.
