Disadvantages of Incorporating
While it would appear that the
argument for incorporating is strong, it is not always the business structure for
everyone. You may decide not to incorporate due to one of the following reasons:
1. Maintaining a corporation requires more paperwork and record keeping than sole
proprietorships. Each individual state has its own legal procedures and regulations for
forming and maintaining a corporation in good standing.
Also, it is usually more costly to set up a corporation than any of the other major
business structures. If you incorporate with a lawyer, fees could run between $500 to
$2,000 or more. (Please see how you can have New Magnolia, Inc. form your corporation in
Mississippi for much less.)
2. If the profit from the business is not significant there may not be enough income to
take advantage of the tax and other benefits of a corporation.