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Incorporating a Business E-mail
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Article Index
Incorporating a Business
Benefits of Incorporating
Right Corporate Structure
Steps to Incorporate
Where to Incorporate
Incorporation Help
Corporate Compliance
Building Corporate Staff
Re-Investing
Closing Your Corporation
State Level Resources
Legal Document Templates
Comments
If you have a business of any type then chances are you have asked yourself whether or not you should incorporate your business at some point. More commonly then not small businesses start out as sole proprietorship's, but as the business grows, it may enter your mind to become incorporated.

There are some main advantages and disadvantages of incorporating your business that you may want to look at before you make your final decision.

One of the biggest advantages is the limited liability of the incorporated company. That simply means that you are no longer on your own, and your liability is limited to what you have invested in your company. You will no longer have to assume all of the liability so debts that you may have to guarantee early in the business such as cars and houses will no longer be seized unless you give a personal guarantee. You also can not personally be sued as when you owned it strictly on your own.

Another advantage is that if you die or leave the business then the company will go on. If this is one of your main goals then you should consider becoming incorporated. Raising money is also generally much easier. This helps your business grow quicker and more substantially then if you were doing it just on your own. Whereas you have only your credit and equity to rely on as a sole proprietorship, as a corporation you can sell shares of stock and raise equity capital which occurs no interest and generally doesn’t have to be repaid.

Lastly, if you are incorporated you have some pull with tax time. You can then determine when you receive your personal income which is a tax advantage. Being incorporated allows you to get your income when you pay less in tax. Also, it gives you potential for tax deferral which may help you with tax savings depending on if you have fallen in the tax bracket or the tax rates have fallen.

On the flip side, one of the disadvantages of becoming incorporated as a small business means you’ll be filing two tax returns. That means more accounting fees and increased paperwork in general. Besides the extra tax papers, receipts, and ledgers you need to keep, there will be more paperwork for the minute book you must keep during corporate meetings, the share register papers, as well as the transfer register. There are many documents you need to have on hand at all times that you wouldn’t necessarily have as a sole proprietorship.

Lastly, you will not be eligible for personal tax credits. That means that every dollar your corporation has earned will be taxed. When certain tax credits can not longer be claimed you may or may not make more money as a corporation. You’ll have less tax flexibility in general. Only you can decide which choice is best for you. Both have advantages and disadvantages and you should do serious research before making a choice.



 
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