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Incorporating a Business

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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 Page 2 of 13 Benefits of Incorporating Your Business When you decide to incorporate your business you do get certain benefits that a non-corporate entity isn’t entitled to have. This could come in the form of tax advantages or loss of liability to an individual person. When deciding whether or not to incorporate your business you need to take these advantages into consideration. The first benefit is that once a company becomes a corporation it is then considered to be a separate legal entity which means it is similar to a person in the way that it can be sued or sues someone else. The individual owners of the company are not liable for the debts and obligations of the company whereas if you are in a sole proprietorship you would be held liable and could possibly lose everything you have if your business goes bankrupt or has a lawsuit put against it. As long as the individual owners have not signed a personal guarantee at any time, or have joint accounts, the corporation is then liable for everything. It is a great way to know that if your business goes sour you can’t lose everything you worked so hard for such as your house and car. Another benefit to incorporating your business comes in the form of taxes, which is why so many people choose to incorporate their business. Taxes can take a big chunk of money from your profits and filing the right structure of incorporation can ease your pain a little bit. When you are have your small business that is not a corporation you will have to pay self-employment taxes on top your federal income. Essentially you are paying your social security taxes which if you worked for someone else, would come directly out of your paycheck. However, when added onto your normal taxes they can really add up when having to pay them in one lump sum. Also, corporations allow you to accumulate your assets and wealth with corporate tax rates which are much lower than individual tax rates. Other benefits of incorporating your company are that corporations can deduct business operating losses without any restrictions. Corporations can also split the income with shareholders to lower the overall taxes by putting it in a different tax bracket. This is called income shifting and it is done quite frequently, and legally. What is also nice about corporations is that whereas sole proprietors are often the subject of frequent IRS audits, it is extremely rare that a corporation will get audited. Another important benefit is that most benefits in a corporation such as medical, life insurance, education, retirement plans, entertainment, travel, and education just to name a few are considered tax free to the employees and are deductible. Even if your company has only one employee this will hold true in most states. A few last benefits are that even if you die or go bankrupt, your corporation will still continue to exist. A corporation has more flexibility and makes it generally easier to run a business so you may want to consider your incorporation options if you can see these benefits helping you in the long run. << Prev - Next >>

 

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