What are the benefits of incorporating a small business? Is a LLC as beneficial as a traditional corporation?

The benefit of incorporating a small business is the liability protection. If your company isn't incorporated and someone sues your company and wins a judgement, you are personally responsibile for paying the debt if the company doesn't have enough money and assets to cover it. That includes the selling of your personal assets if necessary based on the laws of your state.

If you incorporate and follow all the required formalities expected of a corporation and don't do anything fraudulent, the liability for any judgement stops with the corporation's assets.

An LLC is just as beneficial as a corporation as far as liability protection. An LLC doesn't require all the formalities as a regular c-corporation requires, though. However, an LLC cannot deduct and give as many benefits to its members (comparable to the officers in a c-corporation) as a c-corporation can.

Income from a c-corporation is state income tax free when the c-corporation is formed in Nevada and the income is received within the state of Nevada because Nevada doesn't have a corporate income tax. If you don't have your business in Nevada and do business actually in a state that has a state corporate income tax (registered there as a corporation from another state), you will still have to pay corporate income tax to the state in with you are earning that income based on their laws. It is possible, though, to have two business forms and legally transfer income from a business that is doing business in the income tax state to the business in the non-income tax state by one providing services to the other, thereby bleeding income from one to the other. By the way, even if you arrange things so you don't have to pay state income tax, remember that federal corporate income tax still applies no matter what state you incorporate in. There are, of course, legal ways to avoid that too in most cases.

There's a really good book on the difference between LLC's and corporations called, "LLC or Corporation?: How To Choose The Right Form For Your Business", by Anthony Mancuso. I recently got a copy from my library and found it really good. It discusses and compares all the business forms, not just LLC's and corporations as the title implies. I bought another book by the same author entitled, "The Corporate Records Handbook" which also looks good if you plan on forming a c-corporation or s-corporation.

I'm planning on forming a c-corporation instead of an LLC in spite of the increased formalities required because I want my corporation to pay all my medical and health maintenance bills with before-tax income.

Good luck!

Check out the source box for further information. The 2nd link goes to an article that discusses the difference between those two.

Check out the Small Business Administration web site -- they're a great resource for the small business owner. I listed a couple of other handy links as well.

Prior to investing your time, money & effort into a business name, it is strongly advised that comprehensive research be conducted to ensure that the name you're interested in is truly available.

This entails searching the pending & registered Federal and State trademark files as well as the US National Common-Law files. Then, if clear, you can decide if you would like to file for a Federal or a State trademark.

Research is needed to make sure your trade name is legally available, before opening, before expansion, before incorporation or before designing your logo. Similarities in sound, appearance and meaning affect you too!

There are 16+ million trade names in use in the United States. Similar names matter, if close in sound, appearance or meaning. Similar names in related classes, distribution channels and customer matter too. You are affected by Common Law use (14 million), State Trademarks (500,000) and Federal Trademarks (2 million).

LLC. this is the best option for you.