The majority of small businesses are owned by a single individual. An additional pool is family owned or controlled. The balance usually involves friends or relatives that are passive in ownership. These forms of ownership create some interesting shareholder dynamics and if not thought out, can create some legal and financial issues in small business when a life changing event occurs.
Expanded Control over Legacy
Incorporation allows the small business owner many alternatives to the business life. The most common issue is financial growth via the sale of stock and/or raising more capital. In rare situations, it is possible to go public. An owner or controlling shareholder can control and manipulate the legacy (future history) of the business by exercising various tools to achieve the desired outcome.
As a small business grows, there comes a time when the owner(s) should consider incorporating the business. A corporation is a separate entity recognized by the state of domicile for the business. It is as if a new life is created. The state acknowledges the existence of this entity and therefore grants limited legal rights similar to those rights possessed by the citizens of that state.