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HOW TO INCORPORATE

Do I need to change my corporate structure?
 

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Law & Taxation mentor Barbara Weltman responds to the following question from an inc.com user:
I set up my home building business as an S corporation. I have recently terminated the building and have started investing my own funds in the stock market as my corporate activity. Is this OK, or do I need another corporate structure?

Barbara Weltman responds:
You must look at your articles of incorporation to determine whether you can use the corporation for a purpose other than home building. If the articles of incorporation were limited to that purpose, then trading would be outside the corporation's authority. If they were general articles of incorporation authorizing all lawful activities, then you can use the corporation for trading.

Whether you should is another question. Maintaining a corporation entails added costs such as accounting fees and state fees. Do you need the corporate protection from personal liability if you're only doing stock trades?

If not, liquidating the corporation in this instance may simplify your financial life. But, in any case, if you decide to return to home building in the event that stock trading doesn't work out, you may want to keep the corporation alive for that purpose.

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Last updated: Nov 3, 2000




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