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Primary Contact

316 Mile Long Building

Amorsolo Street

Legaspi Village

Makati City

1200 Philippines

Telephone: (632) 8941441

TeleFax: (632) 8124296

e-mail: gtalaw@gtalawphil.com

 

Office Hours

9:30AM to 5:30PM PH Time

Monday - Friday

 

www.gtalawphil.com

       
     

Should You Incorporate Your Business?

 

Many new business owners and those seeking to expand ask themselves whether they should incorporate. Unfortunately, there's no one right answer to this question. The form of business you choose can vary depending on your type of business and your specific needs. You might consider incorporating your business if you are interested in limiting shareholder liability, securing certain tax benefits or obtaining financing. Here are the pros and cons for you to consider.

 

Benefits of incorporating your business

 

1. Protection from personal liability

Limiting liability often is the most important reason for small business owners to incorporate. Assuming that all the legal requirements for establishing and maintaining a corporation have been met, a corporation is treated as a separate legal entity and, as such, incurs business debts or liabilities on its own behalf. Typically, this means that, as a shareholder, you are not personally held liable for the debts and obligations of the corporation if the company cannot pay its debts or is sued. The only exception to this rule is that when company assets are not enough to pay corporate debts. But even then, shareholders are only liable only up to the extent of their shareholdings. On the contrary, in a partnership, a proprietor's or partner's home, savings, and other assets can be seized to pay the debts of the business.
 

 

2. Tax benefits

Incorporating has a number of tax advantages. Corporations have greater flexibility in deducting fringe benefits and other expenses. The cost of salaries, bonuses, education benefits, and dependent care assistance are among the benefits deductible by corporations. Certain types of corporations may also enjoy tax holidays under Philippine laws.

 

3. Access to capital

Incorporating your business can also result in greater flexibility in raising capital. Instead of borrowing money and making interest payments, you can raise capital through the sale of stock and other equity interests. Although this involves giving up some ownership of the company, shares offered to investors can be tailored so that you maintain control of the company.

 

4. Continuous life

A corporation is the most enduring legal business structure. Unlike a proprietorship or partnership, a company does not cease to exist upon the death of its owners. If an owner of a corporation dies or wishes to sell his or her interest, the corporation can continue to exist and do business.

 

Disadvantages of incorporation

 

1. Complexities

Forming and maintaining a corporation in good standing requires a significant amount of paperwork, record keeping and accounting. When a corporation is first established, articles of incorporation must be filed. Typically, corporations must hold and record minutes of annual shareholder and director meetings and document major decisions by directors. Also, a corporation needs to keep excellent financial records to facilitate the filing of more complicated tax returns.

 

Seek professional advice



Incorporating your business is not a decision to be taken lightly or without the proper analysis of your company's circumstances. A legal professional can help you determine whether incorporating makes good business sense or whether you should consider another type of entity such as partnership or single proprietorship. Like a corporation, these two entities have advantages and disadvantages, so it's a good idea to learn about all three before deciding what legal form your business should take.

 

 

Contact Us

___________________________________________________________________

 

You're invited to call us to discuss your company's legal matters. We shall be glad to talk with you over the telephone, or in our office or yours, whichever is easiest for you. You can also e-mail us at gtalaw@gtalawphil.com and we shall get back to you immediately.

 

GUZMAN TAŅEDO & ACAIN

Mile Long Building 316

Legaspi Village

Amorsolo Street

Makati City

Telephone: 8941441

TeleFax: 8124296

e-mail: gtalaw@gtalawphil.com 

   
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Guzman Taņedo & Acain Law Offices
316 Mile Long Building, Amorsolo Street, Makati City, Philippines - Telephone: 894.14.41; Telefax: 812.42.96

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